Read the following information and answer the questions:
On 1st April 2013, a company made an issue of 10,000, 9% debentures of ₹100 each at ₹92 per debenture. The terms of issue provided for redemption of 2,000 debentures every year starting from 31st March 2016, either by conversion into equity shares of ₹20 each or by draw of lot at par at the company's option. On 31st March 2016, the company redeemed 2,000, 9% debentures by converting them into equity shares of ₹20 each.
What Journal entry will be passed when equity shares are issued in conversion of debentures?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Debentureholders A/c Dr. 1,84,000 To Equity Share Capital A/c 1,84,000
Redemption by conversion is recorded in two steps. First the amount due is credited to the debentureholders (₹1,84,000, the net amount received on the 2,000 debentures). Then the debentureholders are debited and Equity Share Capital is credited when the new shares are issued:
Debentureholders A/c Dr. ₹1,84,000 — To Equity Share Capital A/c ₹1,84,000
NCERT (2026-27 edition):
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