A company issued Rs. 2,00,000, 9% debentures of Rs. 100 each at a discount of 5% repayable at par. Correct Journal Entry at the time of transfer of debenture application money to debentures account will be:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → 9% Debenture Application & Allotment A/c Dr. Rs. 1,90,000 and Discount on Issue of Debentures A/c Dr. Rs. 10,000, to 9% Debentures A/c Rs. 2,00,000
The debentures are issued at a 5% discount and repayable at par. On transfer of the application money, the Debentures Account is always credited with the nominal value. The company receives less than that, and the shortfall is recorded as Discount on Issue of Debentures, a loss on issue.
Nominal value = Rs. 2,00,000
Discount = 5% of Rs. 2,00,000 = Rs. 10,000
Money received on application = Rs. 2,00,000 − Rs. 10,000 = Rs. 1,90,000
9% Debenture Application & Allotment A/c Dr. 1,90,000
Discount on Issue of Debentures A/c Dr. 10,000
To 9% Debentures A/c 2,00,000
The Application & Allotment Account is debited to close it with the money received, the Discount account is debited with the loss, and the Debentures Account is credited with the full face value the company will repay.
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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