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Khush Bakht Ltd issued6,2% Debentures of Rs. each at on1st January,. The debenture holder had the option of converting within one year debentures into ordinary shares of Rs. each at Rs..
At the end of1st year the interest on debentures was outstanding. Holders of debentures decided to take advantages of the option.
Required: Give journal entries and prepare balance sheet.
Accounting entries at the time of issue of debentures is as follows
Dr. Cash/Bank 1
Cr. Debenture(loan) 1
At the time of year, the following entries are passed
Dr. Interest expense 0.062
Cr. Interest payable 0.062
When the debenture holder get the instrument converted into shares the
Dr. Debenture 1
Cr. Share capital
Cash Debit Rs/- 5000 Furniture Credit Rs/- 5000
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