Aashirward Company Limited purchased assets of a book value of र2,20,000 from another company and agreed to make the payment of purchase consideration by issuing 2,000, 10% debentures of र100 each at a premium of 10%. What will be the journal entry for the issue of debentures?

Vendors Dr.                                           र2,20,000
       To 10% Debentures A/c                                  र2,00,000
       To Securities Premium Reserve A/c                  र20,000

The correct answer is option 2-
Vendors Dr.                                           र2,20,000
       To 10% Debentures A/c                                  र2,00,000
       To Securities Premium Reserve A/c                  र20,000

Following entries are passed for the purchase of assets and issue of debentures.

1. On purchase of assets:
  Sundry Assets A/c Dr.
       To Vendor’s
2. On issue of debentures At premium:
    Vendors Dr.
           To Debentures A/c
           To Securities Premium Reserve A/c

In this case assets =  र2,20,000
Issue 2000, 10% debentures of र100 each at a premium of 10%. So, journal entry will be-

    Vendors                            Dr.  2,20,000
           To Debentures A/c                          2,00,000 (2000 x 100)
           To Securities Premium Reserve A/c 20,000 (2000 x 10)