Question

A Limited issued 5000, 10% debentures of Rs. 100 each, at a premium of Rs. 10 per debenture payable as follows:
On application Rs. 25, On allotment Rs. 45 (including premium), On first and final call Rs. 40.
The debentures were fully subscribed and all money was duly received.
Select the correct journal entries related to the above case from the following.
(A)

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	10% Debenture Allotment A/c Dr.		2,25,000
	To 10% Debentures A/c			1,75,000
	To Securities Premium Reserve A/c			50,000

(B)

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Bank A/c Dr.		1,25,000
	To 10% Debenture Application A/c			1,25,000

(C)

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Bank A/c Dr.		2,00,000
	To 10% Debenture First & Final Call A/c			2,00,000

(D)

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Bank A/c Dr.		2,20,000
	To 10% Debenture Allotment A/c			2,20,000

Choose the correct answer from the options given below:

• A. (A), (B) and (C) only
• B. (A), (B) and (D) only
• C. (A), (B), (C) and (D)
• D. (B), (C) and (D) only

Hint:

Multiply 5,000 by 25, 45 and 40 for each instalment. Allotment of Rs. 2,25,000 includes Rs. 50,000 premium, so a bank entry of Rs. 2,20,000 is wrong.

Answer 1

The Correct Option is A

Step 1: Build the correct entries first:
Instead of testing each entry blindly, we first write what the books should show and then compare. With 5,000 debentures, each instalment total is number of debentures times the amount per debenture.

Step 2: Application:
Money received: $5000 \times 25 = 1{,}25{,}000$. Entry: Bank Dr. 1,25,000 To Debenture Application A/c 1,25,000. This is exactly entry (B).

Step 3: Allotment:
Amount due: $5000 \times 45 = 2{,}25{,}000$. Premium in it: $5000 \times 10 = 50{,}000$. Balance for debentures: $2{,}25{,}000 - 50{,}000 = 1{,}75{,}000$. Entry: Allotment A/c Dr. 2,25,000 To Debentures A/c 1,75,000 To Securities Premium A/c 50,000. This is entry (A). When the money is received, the bank entry must also be for Rs. 2,25,000, but entry (D) shows Rs. 2,20,000, so (D) is wrong.

Step 4: First and final call:
Amount: $5000 \times 40 = 2{,}00{,}000$. Entry: Bank Dr. 2,00,000 To First and Final Call A/c 2,00,000. This is entry (C).

Step 5: Cross-check the total:
The three instalments add up to $1{,}25{,}000 + 2{,}25{,}000 + 2{,}00{,}000 = 5{,}50{,}000$, which equals $5000 \times 110$, that is face value plus premium. So the correct set is A, B, C.

Final Answer:
Only (A), (B) and (C) are right, so option 1. \[\boxed{\text{Option 1}}\]