question_answer

Wadhwa Ltd issued 60,000 15% debentures of Rs. 10 each credited as fully paid to the promoters for their services and issued 15,000, 15% debentures of Rs. 10 each credited as fully paid to the underwriters for the underwriting services. Journalise these transactions. Also identify the value shown by the company in issuing debentures to underwriters.

Answer:

Ans.                                                                                         JOURNAL

Date	Particulars		LF	Amt (Dr)	Amt (Cr)
	Formation Expenses/Goodwill A/c	Dr		6,00,000
	To 15% Debentures A/c				6,00,000
	(Being 60,000, 15% debentures of Rs. 10 per debenture issued to promoters for their services)
	Underwriting Commission A/c	Dr		1,50,000
	To Underwriters A/c				1,50,000
	(Being underwriting commission due)
	Underwriters A/c	Dr		1,50,000
	To 15% Debentures A/c				1,50,000
	(Being 15,000, 15% debentures of Rs. 10 per debenture issued to underwriters for their services)

Value being shown by the company is Recognition By issuing shares to underwriters, company is adhering to the value of recognition of services which in turn will motivate employees to work harder.