Aashirward Company Limited purchased assets of a book value of र1,90,000 from another company and agreed to make the payment of purchase consideration by issuing 2,000, 10% debentures of र100 each at a discount of 5%. What will be the journal entry for the allotment of shares?

Vendors                                                Dr.    र1,90,000
Discount on Issue of Debenture A/c     Dr.    र10,000
        To 10% Debentures A/c                                    र2,00,000
(Debentures allotted to vendors at discount)

The correct answer is option 4-
Vendors                                                Dr.    र1,90,000
Discount on Issue of Debenture A/c     Dr.    र10,000
        To 10% Debentures A/c                                    र2,00,000
(Debentures allotted to vendors at discount)

1. On purchase of assets:
    Sundry Assets A/c Dr. 
          To Vendor’s
(Purchase of business)

2. On issue of debentures At a discount:
    Vendors Dr.
    Discount on Issue of Debenture A/c Dr.
           To Debentures A/c
(Debentures allotted to vendors at discount)

So, vendor account is debited with ₹1,90,000
Debentures = 2000 x 100
                   = ₹2,00,000 (Credit side)
Discount = 2,000 x 5
               = ₹10,000 (Debit side)

So, the correct journal entry is-
Vendors                                                Dr.    र1,90,000
Discount on Issue of Debenture A/c     Dr.    र10,000
        To 10% Debentures A/c                                    र2,00,000
(Debentures allotted to vendors at discount)