H Ltd. purchased machinery worth Rs. 99,000 from P Ltd. The payment was made by issue of 12% debentures of Rs. 100 each. Pass the necessary journal entries for the issue of debentures when debentures are issued at 10% discount in the books of H Ltd.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → P Ltd. Dr. 99,000, Discount on Issue of Debentures A/c Dr. 11,000, To 12% Debentures A/c 1,10,000
Debentures are always credited at their face value. When they are issued at a discount, the vendor is satisfied with fewer rupees per debenture, and the discount is debited as a loss on issue.
Issue price = Rs. 100 − 10% = Rs. 90 per debenture
Number of debentures = Rs. 99,000 ÷ Rs. 90 = 1,100
Face value credited = 1,100 × Rs. 100 = Rs. 1,10,000
Discount debited = Rs. 1,10,000 − Rs. 99,000 = Rs. 11,000
P Ltd. is debited with Rs. 99,000 because the debentures settle the Rs. 99,000 the company owes it for the machinery.
Note: NTA picked this question from an NCERT (2026-27) illustration and changed the figures. Do not ignore NCERT while practising numericals.
NCERT (2026-27 edition):
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