X Limited Issued 10,000, 12% debentures of र100 each payable र40 on application and र60 on the allotment. The public applied for 14,000 debentures.
Applications for 9,000 debentures were accepted in full.
Applications for 2,000 debentures were allotted 1,000 debentures.
The remaining applications were rejected.
The total money received on the application is र5,60,000 (14000 X 40).

What will be the journal entry for the adjustment of this whole application money and transfer application money to debentures A/c?

12% Debenture Application A/c   Dr.    र5,60,000
       To 12% Debentures A/c                              र4,00,000
       To Debentures Allotment A/c                      र40,000
       To Bank A/c                                                र1,20,000
(Adjustment of application money)

The correct answer is option 4- 
12% Debenture Application A/c   Dr.    र5,60,000
       To 12% Debentures A/c                              र4,00,000
       To Debentures Allotment A/c                      र40,000
       To Bank A/c                                                र1,20,000
(Adjustment of application money)

Total application money = र5,60,000
Debentures amount = 10,000 debentures X 40
                                 = र4,00,000
(Application related money is transferred to debentures account so debenture account is credited)

Refunded amount = 3,000 debentures X 40
                             = र1,20,000
(Bank account is credited for refunded amount)

Adjusted in allotment = 1,000 debentures X 40
                                  = र40,000
(Debenture Allotment account is credited for adjusted amount against allotment)

So, the total amount received र5,60,000, amount adjusted. So, the following journal entry is passed-
12% Debenture Application A/c   Dr.    र5,60,000
       To 12% Debentures A/c                              र4,00,000
       To Debentures Allotment A/c                      र40,000
       To Bank A/c                                                र1,20,000
(Adjustment of application money)