Pass the journal entry for the redemption of debentures from the following-

X Ltd. issued 5,000, 9% debentures of ₹100 each at par and redeemable at par at the end of 5 years out of capital.

1) 9% Debentures A/c Dr. 5,00,000
      To Debentureholders A/c       5,00,000
(Amount due on redemption debentures)

2) Debentureholders A/c Dr. 5,00,000
        To Bank A/c                            5,00,000
(Payment made to debentureholders)

The correct answer is option 2-
1) 9% Debentures A/c Dr. 5,00,000
      To Debentureholders A/c       5,00,000
(Amount due on redemption debentures)

2) Debentureholders A/c Dr. 5,00,000
        To Bank A/c                            5,00,000
(Payment made to debentureholders)

*As redemption is out of capital, there is no need to create to create DRR.

* First entry will be made for the amount due to debentureholders. Amount due = 5000 x 100 = ₹5,00,000
1) 9% Debentures A/c Dr. 5,00,000
      To Debentureholders A/c      5,00,000
(Amount due on redemption of debentures)

* 2nd entry will be made for the payment to debentureholders which decrease the bank balance of the company.
2) Debentureholders A/c Dr. 5,00,000
        To Bank A/c                       5,00,000
(Payment made to debentureholders)