This document discusses various accounting entries related to corporate accounting, share capital, debentures, and the purchase of own debentures by a company. It provides journal entries for issuing share capital for cash, issuing debentures at par, premium and discount, and redeeming debentures. It also discusses entries for purchasing a company's own debentures and subsequently selling or cancelling them.

1. 11
Module 3.
Recording Financial
Transation
Dr. Varadraj Bapat

2. Dr. Varadraj BapatDr. Varadraj Bapat 22
Index
Corporate Accounting
Share Capital and its types
Issue of share capital
Debentures – issue and
redemption and purchase
of own debentures

3. Dr. Varadraj BapatDr. Varadraj Bapat 33
Index
Corporate Accounting
This file discusses various
entries which are peculiar
to companies.

4. Dr. Varadraj BapatDr. Varadraj Bapat 44
Corporate Accounting
Share Capital
 Total capital of the company is
divided into a number of small
indivisible units of a fixed amount
and each such unit is called a
share.
 As the total capital of the
company is divided into shares,
the capital of the company is
called ‘share capital’.

5. Dr. Varadraj BapatDr. Varadraj Bapat 55
 The fixed value of a share, printed on
the share certificate is called nominal/
par/ face value of a share.
 A company can issue shares at a price
different from the face value of a
share; this is issue price of share.
 Types of shares
Shares issued by a company are
divided into two categories:

6. Dr. Varadraj BapatDr. Varadraj Bapat 66
 Preference Shares:
The shares which are assured of
preferential dividend at a fixed rate
during the life of company and carry a
preferential right over other
shareholders to be paid first in case of
winding up of company.
 Equity Shares:
Equity shares are those shares, which
are not preference shares. It means
that they do not enjoy

7. Dr. Varadraj BapatDr. Varadraj Bapat 77
any preferential rights in the matter of
payment of dividend or repayment of
capital.
 Issue of share capital
 The shares can be issued by company
either for cash or for the consideration
other than cash.
 A public company issues a prospectus
inviting general public to subscribe for
its shares. On the basis of prospectus,
application

8. Dr. Varadraj BapatDr. Varadraj Bapat 88
are deposited in a scheduled bank by
the interested parties along with the
amount payable at the time of
application in cash which is called as
application money.
 Company reserves the right to reject
or accept an application fully or
partially. Successful applicants become
shareholders of the company and are
required to pay the second installment
which is known as allotment money.

9. Dr. Varadraj BapatDr. Varadraj Bapat 99
 Subsequent installments, if any, to be
called by the company are known as
calls.
 Journal Entries for issues of
shares for cash
1.On the receipt of the application
money
Bank A/c…… Dr.
To Shares Application money

10. Dr. Varadraj BapatDr. Varadraj Bapat 1010
2.On the allotment of share
Share Allotment A/c…..Dr.
Share Application A/c…Dr.
To Share Capital A/c
To Securities Premium A/c
(if shares are issued at premium)
3.On the receipt of allotment money
Bank A/c…..Dr.
To Share Allotment A/c

11. Dr. Varadraj BapatDr. Varadraj Bapat 1111
4.On the call being made
Share call A/c…..Dr.
To Share Capital A/c
5. On receipt of call money
Bank A/c……Dr.
To Share Call A/c
6. If call money is received from
shareholders even before making call

12. Dr. Varadraj BapatDr. Varadraj Bapat 1212
Bank A/c….Dr.
To Calls in Advance A/c
7. If money is not received from
shareholders on any call
Calls in Arrears A/c….Dr.
To Share Allotment A/c
To Share Call A/c

13. Dr. Varadraj BapatDr. Varadraj Bapat 1313
The Articles of Association of a
company usually empower the
director to charge interest at a
stipulated rate on calls in arrears.
According to Table A of Companies
Act 1956 interest at the rate of 5%
p.a. is to be charged on unpaid calls
from the due date of the call up to
the actual payment.

14. Dr. Varadraj BapatDr. Varadraj Bapat 1414
JE for interest receivable on call in
arrears
Shareholders A/c….Dr.
To Interest on Calls in Arrears A/c
For receipt of interest
Interest on Calls in Arrears A/c…Dr.
Shareholders A/c

15. Dr. Varadraj BapatDr. Varadraj Bapat 1515
According to Table A of Companies
Act 1956 interest at the rate of 6%
p.a. is to be paid on calls in advance
from the actual payment up to due
date of the call.
JE for Interest due
Interest on Calls in Arrears A/c…Dr.
To Shareholders A/c

16. Dr. Varadraj BapatDr. Varadraj Bapat 1616
Payment of interest
Shareholders A/c …Dr.
Interest on Calls in Advance A/c

17. Dr. Varadraj BapatDr. Varadraj Bapat 1717
Debentures
Issuing debt instruments by offering
the same for public subscription is
one of the sources of financing the
business activities. Debt financing
does not only help in reducing the
cost of the capital but also helps in
designing appropriate capital
structure of the company.

18. Dr. Varadraj BapatDr. Varadraj Bapat 1818
Debenture is one of the most
commonly used debt instrument
issued by the company to raise
funds for the business.
A debenture/ bond is the a
security issued by the company
under its seal, acknowledging a
debt and containing provisions as
regards repayment of the principal
and interest.

19. Dr. Varadraj BapatDr. Varadraj Bapat 1919
Issue of debentures can be
categorized into the following:
1.Debenture issued at par and
redeemable at par or at a discount
2.Debenture issued at discount and
redeemable at par or at a discount
3.Debenture issued at premium and
redeemable at par or at a discount
Issue of debentures

20. Dr. Varadraj BapatDr. Varadraj Bapat 2020
4.Debenture issued at par and
redeemable at premium
5.Debenture issued at a discount
and redeemable at premium

21. Dr. Varadraj BapatDr. Varadraj Bapat 2121
Journal Entries in each of the
above cases are discussed
below:
1. Debenture issued at par and
redeemable at par or at a
discount
For receipt of application money:
Bank A/c……Dr.
To Debenture ApplicationMoney A/c

22. Dr. Varadraj BapatDr. Varadraj Bapat 2222
For transfer of application money to
debenture account:
Debenture Application A/c
To Debenture A/c
2.Debenture issued at discount and
redeemable at par or at a discount
For receipt of application money:
Bank A/c……Dr.
To Debenture Application Money A/c

23. Dr. Varadraj BapatDr. Varadraj Bapat 2323
For transfer of application money
to debenture account:
Debenture Application A/c
To Debenture A/c
3.Debenture issued at discount and
redeemable at par or at a discount
For receipt of application money:
Bank A/c……Dr.
To Debenture Application Money
A/c

24. Dr. Varadraj BapatDr. Varadraj Bapat 2424
For transfer of application money to
debenture account:
Debenture Application A/c
Discount on issue of debenture A/c
To Debenture A/c
4.Debenture issued at premium and
redeemable at par or at a discount
For receipt of application money:
Bank A/c……Dr.
To Debenture Application
Money A/c

25. Dr. Varadraj BapatDr. Varadraj Bapat 2525
For transfer of application money to
debenture account:
Debenture Application A/c
To Debenture A/c
To Securities premium A/c
5.Debenture issued at par and
redeemable at premium
For receipt of application money:
Bank A/c……Dr.
To Debenture Application
Money A/c

26. Dr. Varadraj BapatDr. Varadraj Bapat 2626
For transfer of application money
to debenture account:
Debenture Application A/c
To Debenture A/c
Call made consequent upon
allotment:
Debenture Allotment A/c
Loss on issue of Debenture A/c
To Debenture A/c
To Debenture redemption
Premium A/c

27. Dr. Varadraj BapatDr. Varadraj Bapat 2727
6.Debenture issued at a discount
and redeemable at premium
For receipt of application money:
Bank A/c……Dr.
To Debenture Application Money
A/c
For transfer of application money to
debenture account:
Debenture Application A/c
To Debenture A/c

28. Dr. Varadraj BapatDr. Varadraj Bapat 2828
Call made consequent upon
allotment:
Debenture Allotment A/c
Discount /Loss on
issue of Debenture A/c
(Discount + premium on
redemption)
To Debenture A/c
To Debenture redemption
Premium A/c

29. Dr. Varadraj BapatDr. Varadraj Bapat 2929
7.Debenture issued at a premium
and redeemable at premium
For receipt of application money:
Bank A/c……Dr.
To Debenture Application
Money A/c
For transfer of application money to
debenture account:
Debenture Application A/c
To Debenture A/c

30. Dr. Varadraj BapatDr. Varadraj Bapat 3030
Call made consequent upon
allotment:
Debenture Allotment A/c
Loss on issue of Debenture A/c
(amount equal to premium on
redemption)
To Debenture A/c
To Debenture redemption
Premium A/c

31. Dr. Varadraj BapatDr. Varadraj Bapat 3131
Redemption of debentures can
be categorized into the
following:
1. Debenture issued at par and
redeemable at par
2. Debenture issued at discount
and redeemable at par
Redemption of debentures

32. Dr. Varadraj BapatDr. Varadraj Bapat 3232
3. Debenture issued at premium
and redeemable at par
4. Debenture issued at par and
redeemable at premium
5. Debenture issued at a discount
and redeemable at premium
6. Debenture issued at a premium
and redeemable at premium

33. Dr. Varadraj BapatDr. Varadraj Bapat 3333
Journal Entries in each of the
above cases are discussed
below:
1. Debenture issued at par and
redeemable at par
-Closing debenture account
Debenture A/c……Dr.
To Debenture holders A/c

34. Dr. Varadraj BapatDr. Varadraj Bapat 3434
-For payment of money to
debenture holders:
Debenture holders A/c
To Bank A/c
2.Debenture issued at discount and
redeemable at par
-For transfer of loss of discount
to profit & loss account:
Profit & Loss A/c……Dr.
To Discount on issue of
debenture A/c

35. Dr. Varadraj BapatDr. Varadraj Bapat 3535
the above entry may be
repeated during the tenure of
the debenture for writing off
proportionate discount every
year.
-Closing debenture account
Debenture A/c……Dr.
To Debenture holders A/c

36. Dr. Varadraj BapatDr. Varadraj Bapat 3636
-For payment of money to
debenture holders:
Debenture holders A/c
To Bank A/c
3. Debenture issued at premium
and redeemable at par
-Closing debenture account
Debenture A/c……Dr.
To Debenture holders A/c

37. Dr. Varadraj BapatDr. Varadraj Bapat 3737
-For payment of money to
debenture holders:
Debenture holders A/c
To Bank A/c
4. Debenture issued at par and
redeemable at premium
-For transfer of loss of premium
to profit & loss account:

38. Dr. Varadraj BapatDr. Varadraj Bapat 3838
Profit & Loss A/c……Dr.
To Loss on issue of debenture A/c
the above entry may be repeated
during the tenure of the
debenture for writing off
proportionate premium to be paid
on redemption every year.

39. Dr. Varadraj BapatDr. Varadraj Bapat 3939
-Closing debenture and
premium account
Debenture A/c……Dr.
Debenture redemption Premium
A/c……Dr.
To Debenture holders A/c
-For payment of money to
debenture holders:
Debenture holders A/c
To Bank A/c

40. Dr. Varadraj BapatDr. Varadraj Bapat 4040
5. Debenture issued at a
discount and redeemable at
premium
-For transfer of loss of discount
and premium to profit & loss
account:
Profit & Loss A/c……Dr.
To Discount / Loss on issue of
debenture A/c
(Discount + Premium)

41. Dr. Varadraj BapatDr. Varadraj Bapat 4141
-Closing debenture and
premium account
Debenture A/c……Dr.
Debenture redemption Premium
A/c……Dr.
To Debenture holders A/c
-For payment of money to
debenture holders:
Debenture holders A/c
To Bank A/c

42. Dr. Varadraj BapatDr. Varadraj Bapat 4242
6. Debenture issued at a
premium and redeemable at
premium
-For transfer of loss of discount
to profit & loss account:
Profit & Loss A/c……Dr.
To Loss on issue of debenture
A/c
(Premium on redemption)

43. Dr. Varadraj BapatDr. Varadraj Bapat 4343
-Closing debenture and
premium account
Debenture A/c……Dr.
Debenture redemption Premium
A/c……Dr.
To Debenture holders A/c
-For payment of money to
debenture holders:
Debenture holders A/c
To Bank A/c

44. Dr. Varadraj BapatDr. Varadraj Bapat 4444
Debentures sometime are
purchased in an open market
and then cancelled on due date.
Example,
Company has issued 1000 9 %
debentures for Rs. 100000.
interest being payable half
yearly. The company purchases
Purchase of debenture

45. Dr. Varadraj BapatDr. Varadraj Bapat 4545
100 debentures at Rs. 98 per
debenture cum interest (interest
for 6 months).
Journal Entries:
Own Debenture A/c….Dr. 9350
Interest A/c….Dr. 450
To Bank 9800

46. Dr. Varadraj BapatDr. Varadraj Bapat 4646
Suppose out of these debentures
40 debentures sold at Rs. 102 ex
interest and remaining are
cancelled at the end of 6 months
from date of purchase.
Journal Entries
Bank A/c…DR. 4080
To Own Debentures 4080
To Interest A/c 60

47. Dr. Varadraj BapatDr. Varadraj Bapat 4747
Own Debentures A/c…DR. 340
To Profit & Loss 340
(Profit on sale transferred to
P & L A/c)
At the end of 6 months
9% debentures A/c….Dr. 6000
To Own Debenture 5610
To Capital Reserve 390
(Profit on cancellation transferred)