Question

If debentures are issued to a vendor for assets purchased and the vendor's account is credited by Rs 1,10,000, what is the journal entry if the debentures are issued at a premium of 10 %?

• A. Vendor's A/c Dr. Rs 1,00,000; To Debentures A/c Rs 90,000; To Securities Premium Reserve A/c Rs 10,000
• B. Vendor's A/c Dr. Rs 1,10,000; To Debentures A/c Rs 1,00,000; To Securities Premium Reserve A/c Rs 10,000
• C. Vendor's A/c Dr. Rs 1,10,000; To Debentures A/c Rs 1,10,000
• D. Vendor's A/c Dr. Rs 1,20,000; To Debentures A/c Rs 1,10,000; To Securities Premium Reserve A/c Rs 10,000

Hint:

Debentures issued at premium credited to Debentures A/c at face value and Securities Premium Reserve A/c for premium amount.

Answer 1

The Correct Option is B

Step 1: Transaction Analysis
Issuing debentures at a 10% premium signifies that the credited amount exceeds the face value.
Face Value of Debentures = ₹1,00,000
Premium = 10% of ₹1,00,000 = ₹10,000
The vendor's account is credited with the aggregate amount (Face Value + Premium) = ₹1,10,000


Step 2: Journal Entry

  Vendor’s A/c Dr.                       ₹1,10,000
      To Debentures A/c                 ₹1,00,000
      To Securities Premium Reserve A/c ₹10,000
  

Step 3: Outcome
Option (B) accurately represents this journal entry.