9.

Calculation of amount to be T/f to P&L appropriation account

If 0.180975 —---- 1Rs
? —----- 500000
0.180975 X 500000 = 90487.5 or 90488

Year T/f from Calculation of interest(5%) Interest Annual

P&L app. Investment
a/c (nearest 10)
2008 90,488 -- -- 90,490
2009 90,488 90,490X5%=4,525 4,525 (90488+4525)
95010
2010 90,488 90490+95010=185500X5%= 9275 9275 (90488+9275)
99,760
2011 90,488 90490+95010+99,760=2,85,260X5% 14,263 (90488+14263)
1,04,750
2012 90,488 90490+95010+99,760+1,04750=3,90,010X5% 19,500 --

End of 4 th year investment = 3,90,010

Sold for = 3,90,000

-(10)loss

At the end of 2008

Date Particulars L.F Debit Credit

5,00,000
1 Jan Bank a/c ………………………………………………Dr 5,00,000
2008 To debentures a/c
( being debentures issued)

Profit and loss a/c ……………………………………Dr

31Dec To sinking fund a/c 90,488
2008 (Being amount set aside every year) 90,488
Sinking fund investment a/c …………………Dr
31Dec To bank a/c 90,490
2008 (being amount invested in securities ) 90,490
 At the end of 2009

Date Particulars L.F Debit Credit

31/12/ Bank a/c ………………………………………..Dr 4,525
2009 To interest on sinking fund investment a/c 4,525
(being interest received on investment)
Interest on sinking fund investment a/c……….Dr 4,525
31/12/ To Sinking fund a/c 4,525
2009 ( being interest transfer to sinking fund account)
Profit and loss a/c ……………………………………Dr
31/12/ To sinking fund a/c 90,488
2009 (Being amount set aside every year) 90,488
Sinking fund investment a/c …………………Dr
31/12/ 95010
To bank a/c
2009 95010
(being amount invested in securities )

At the end of 2010

Date Particulars L.F Debit Credit

31/12/ Bank a/c ………………………………………..Dr 9275
2010 To interest on sinking fund investment a/c 9275
(being interest received on investment)
Interest on sinking fund investment a/c……….Dr 9275
31/12/ To Sinking fund a/c 9275
2010 ( being interest transfer to sinking fund account)
Profit and loss a/c ……………………………………Dr
31/12/ To sinking fund a/c 90,488
2010 (Being amount set aside every year) 90,488
Sinking fund investment a/c …………………Dr
31/12/ 99,760
To bank a/c
2010 99,760
(being amount invested in securities )

At the end of 2011

Date Particulars L.F Debit Credit

31/12/ Bank a/c ………………………………………..Dr 14,263
2011 To interest on sinking fund investment a/c 14,263
(being interest received on investment)
Interest on sinking fund investment a/c……….Dr 14,263
31/12/ To Sinking fund a/c
2011 ( being interest transfer to sinking fund account) 14,263
31/12/ Profit and loss a/c ……………………………………Dr 90,488
2011 To sinking fund a/c 90,488
(Being amount set aside every year)
31/12/ Sinking fund investment a/c …………………Dr 1,04,750
2011 To bank a/c 1,04,750
(being amount invested in securities )

2012

At the end of 2012

Date Particulars L.F Debit Credit

31/12/ Bank a/c ………………………………………..Dr 19,500
2012 To interest on sinking fund investment a/c 19,500
(being interest received on investment)
Interest on sinking fund investment a/c……….Dr 19,500
To Sinking fund a/c 19,500
31/12/ ( being interest transfer to sinking fund account)
2012
Profit and loss a/c ……………………………………Dr
To sinking fund a/c 90,488
31/12/ (Being amount set aside every year) 90,488
2012

Bank a/c ……………………………………………………..Dr

31/12/ 3,90,000
To sinking fund investment a/c
2012 3,90,000
(being investment were sold )
10
31/12/ Sinking fund a/c ……………………..Dr 10
2012 To sinking fund investment a/c
(being loss on sale of investment)
Sinking fund a/c ………………………………..Dr 4,99,993
31/12/ To General Reserve account 4,99,993
2012 ( being balance transfer to GR)

31/12/ Debentures a/c ……………………………………Dr 5,00,000

2012 To bank A/c 5,00,000
(being amount paid to debentures holders)
 Sinking fund A/c

Date Particulars Jf Amount Date Particulars Jf Amount

31 Dec To balance c/d 90,488 31 Dec By P&L 90,488
2008 2008
90,488 90,488

31 Dec To balance c/d 1,85,501 Jan 1 By balance b/d 90,488

2009 2009 4,525
31 Dec By Interest on SFI a/c 90,488
By P&L
1,85,501 1,85,501
1 jan
31 Dec To balance c/d 2,85,264 2010 By balance b/d 1,85,501
2010 By Interest on SFI a/c 9,275
31 Dec By P&L 90,488

2,85,264 2,85,264

1Jan By balance b/d 2,85,264

31Dec To balance c/d 3,90,015 2011 By Interest on SFI a/c 14,263
2011 31 Dec By P&L 90,488
3,90,015 3,90,015

1Jan
31Dec To sinking fund investment 10 2012 By balance b/d 3,90,015
2012 a/c 31Dec By Interest on SFI a/c 19,500
To Gen Reserve 4,99,993 2012 By P&L 90,488
5,00,003 5,00,003
 Sinking fund investment a/c

Date Particulars Jf Amount Date Particulars Jf Amount

31 Dec To bank 90,490 31 Dec By balance c/d 90,490
2008 2008
90,490 90,490

1 Jan 90,490 31 Dec By balance c/d 1,85,500

2009 To balance b/d 95,010 2009
31 dec To bank
1,85,500 1,85,500
1 Jan
2010 To balance b/d 1,85,500 31Dec By balance c/d 2,85,260
31 Dec To bank 99,760 2010

2,85,260 2,85,260
1Jan
2011 To balance b/d 2,85,260 31 Dec By balance c/d 3,90,010
31 Dec To bank 1,04,750 2011
3,90,010 3,90,010

1 Jan 3,90,010 3,90,000

2012 To balance b/d 31dec By bank
2012
By sinking fund a/c 10
3,90,010 3,90,010
 Interest on sinking fund investment A/C

Date Particulars Jf Amount Date Particulars Jf Amount

31 Dec To sinking fund a/c 4,525 31 Dec By bank a/c 4,525
2009 4,525 2009 4,525

31 Dec
31 9,275 2010 By bank a/c 9,275
Dec2010 To sinking fund a/c
9,275 9,275

31 Dec To sinking fund a/c 14,263 31 Dec By bank a/c 14,263

2011 2011
14,263 14,263

31 Dec To sinking fund a/c 19,500 31 Dec By bank a/c 19,500

2012 19,500 2012 19,500

Debentures a/c

Date Particulars Jf Amount Date Particulars Jf Amount

31Dec To balance c/d 5,00,000 1Jan By bank a/c 5,00,000
2008 5,00,000 2008 5,00,000

1Jan
31Dec To balance c/d 5,00,000 2009 By balance b/d 500,000
2009
5,00,000 5,00,000
1Jan
31Dec To balance c/d 5,00,000 2010 By balance b/d 5,00,000
2010 5,00,000 5,00,000

1Jan
31Dec To balance c/d 500,000 2011 By balance b/d 5,00,000
2011 5,00,000 5,00,000

31Dec To bank a/c 5,00,000 1Jan By balance b/d 5,00,000

2012 2012
500,000 500,000
 8.On April 01, 2014 a company issued 15% debentures of Rs 10,00,000 at par. The debentures
were redeemable at par after three years from the date of Issue. A sinking fund was set up to
raise funds for redemption of debentures. The amount for the purpose was invested in 6%
Government securities of Rs 100 each available at par. The sinking fund table shows that if
investments earn 6% per annum, to get Re.1 at the end of 3 years, one has to invest Rs 0.31411
every year together with interest that will be earned. On March 31, 2017, all the Government
securities were sold at a loss of Rs 6000. and the debentures were redeemed at par.
Prepare Debentures Account Sinking Fund Account, Sinking Fund Investment Account and
Interest on Sinking Fund Investment. Company closes its books of accounts every year on March
31.
Solution: 0.31411-----1

? -------10,00,000 =3,14,110 annual investment

Year T/S fromP&L Calculation of interest Interes Investment

appropriatio t on SFI
n a/c
14-15 3,14,110 --- --- 3,14,110
15-16 3,14,110 3,14,110X6% 18,847 (3,14,110+18,847)
= 3,32,957
16-17 3,14,110 3,14,110+3,32,952=6,47,067X6 38,824 ----
%
647067 -6000 = 641067 ( sale value)
Sinking fund account

Date Particulars J Amount Date Particulars J Amount

f f
31.3.15 To balance c/d 3,14,110 31.3.15 By P&L appropriation a/c 3,14,110
3,14,110 3,14,110

31.3.16 To balance c/d 6,47,067 1.4.15 By balance b/d 3,14,110

31.3.16 By P&L appropriation a/c 3,14,110
By Interest on SFI 18,847
6,47,067 6,47,067
To Sinking fund 6000 1.4.16 By balance b/d
Investment a/c 6,47,067
31.3.17 To General reserve a/c 31.3.17 By P&L appropriation a/c
(Bal fig) 994001 By Interest on SFI 3,14,110
38,824
 10,00,001 10,00,001

Sinking fund investment account

Date Particulars Jf Amount Date Particulars Jf Amount

31.3.15 To bank a/c 3,14,110 31.3.15 By balance c/d 3,14,110
3,14,110 3,14,110

1.4.15 To balance b/d 3,14,110 31.3.16 By balance c/d 6,47,067

31.3.16 To bank 3,32,957
6,47,067 6,47,067
1.4.16 To balance b/d 6,47,067 31.3.17 By sinking fund a/c 6,000
_______ By bank 6,41,067
6,47,067 ____
6,47,067

10. on 1st January 2001 A ltd. Issues 2000 8% Debentures of Rs. 100 each,
repayable at the end of four years at a premium of 5%. It has been decided to
institute a sinking fund for the purpose, the investment being expected to earn 4%
net. Sinking fund tables show that 0.235490 amounts to Rs 1 @4% in four years.
Investment are made in multiples of hundred only. On 31st December 2004 the
investment realized Rs. 1,56,800. The debentures were paid off. Give the journal
entries and show important ledger accounts for four years. (RP)

Redemptions amount = 2000X100=2,00,000+5%=2,10,000

0.235490---1

? -2,10,000 = 49,453

Year T/S Calculation of interest Inter Investment (app to 100)

fromP&L est
appropria on
tion a/c SFI
2001 49,453 --- --- 49,453/49,500
2002 49,453 49,500X4% 1,980 (49,453+1980)51,433
/51400
2003 49,453 49,500+51,400=1,00,900X4%= 4036 (49,453+4036)=53,489/
53,500
2004 49,453 49,500+51,400+53,500= 6176 Value of
1,54,400X4%= investment=1,54,400

1,56,800-1,54,400=2400(profit)

Date Particulars L.F Debit Credit

Bank a/c 2,00,000
1 Jan ………………………………………………………..Dr 10,000
2001 Loss on issue of debenture a/c ………………………Dr 2,00,000
(Premium on redemption) 10,000
To Debenture a/c
To premium on redemption of debenture a/c
( being debentures issued at pre but redemption at 5%
31Dec premium) 49,453
2001 49,453
Profit and loss app a/c ……………………………………Dr
31Dec To sinking fund a/c
2001 (Being amount set aside every year) 49,500
Sinking fund investment a/c …………………Dr 49,500
To bank a/c
(being amount invested in securities )

Date Particulars L.F Debit Credit

31 DEC Bank a/c ………………………………………..Dr 1,980
2002 To interest on sinking fund investment a/c 1,980
(being interest received on investment)
Interest on sinking fund investment a/c……….Dr
To Sinking fund a/c 1,980
( being interest transfer to sinking fund account) 1,980
Profit and loss app a/c ……………………………………Dr
To sinking fund a/c 49,453
(Being amount set aside every year) 49,453
Sinking fund investment a/c …………………Dr
 To bank a/c 51400
(being amount invested in securities ) 51400

Date Particulars L.F Debit Credit

31 DEC Bank a/c ………………………………………..Dr 4,036
2003 To interest on sinking fund investment a/c 4,036
(being interest received on investment)
Interest on sinking fund investment a/c……….Dr 4,036
To Sinking fund a/c 4,036
( being interest transfer to sinking fund account)
Profit and loss app a/c ……………………………………Dr
To sinking fund a/c 49,453
(Being amount set aside every year) 49,453
Sinking fund investment a/c …………………Dr
53,500
To bank a/c
53,500
(being amount invested in securities )

Date Particulars L.F Debit Credit

31 DEC Bank a/c ………………………………………..Dr 6,176
2004 To interest on sinking fund investment a/c 6,176
(being interest received on investment)
Interest on sinking fund investment a/c……….Dr 6,176
To Sinking fund a/c 6,176
( being interest transfer to sinking fund account)
Profit and loss app a/c ……………………………………Dr
To sinking fund a/c 49,453
(Being amount set aside every year) 49,453
Bank a/c ………………………………………………….Dr
1,56,800
To sinking fund investment a/c
1,56,800
(being investment sold)
Sinking fund investment a/c…………………………….Dr 2,400
To Sinking fund a/c 2,400
(being profit on sale of investment )
Debenture a/c ……………………………………………..Dr 2,00,000
Premium on redemption of debenture a/c ….Dr 10,000
To bank 2,10,000
(being debentures are redeemed at 5% premium)
Sinking fund a/c ………………………………………..Dr 212404
To General reserves
(being amount t/f to gen res a/c) 212404

Sinking fund account

 Date Particulars J Amount Date Particulars J Amount
f f
31.12.01 To balance c/d 49,453 31.12.01 By P&L approp.a/c 49,453
49,453 49,453
1.1.2002 By balance b/d
1,00,886 31.12.02 49,453
31.12.02 To balance c/d By interest on SFI 1,980
By P&L approp.a/c 49,453
1,00,886 1,00,886
31.12.03 To balance c/d 1,54,375 1.1.2003 By balance b/d 1,00,886
31.12.03 4,036
By interest on SFI
By P&L approp.a/c 49,453
1,54,375 1,54,375
1.1.2004 By balance b/d 1,54,375
31.12.04 To General Reserves 2,12,404 31.12.04 By interest on SFI 6,176
By P&L approp.a/c 49,453
By sinking fund 2,400
investment(Profit )

2,12,404 2,12,404

Sinking fund investment account

Date Particulars J Amount Date Particulars J Amount

f f
31.12.01 To bank 49,500 31.12.01 By balance c/d 49,500
49,500 49,500
1.1.2002
To balance b/d 49,500 31.12.02 By balance c/d 1,00,900
To bank 51400
1,00,900 1,00,900
1.1.2003 1,00,900 31.12.03 1,54,400
To balance b/d By balance c/d
To bank 53,500
1,54,400 1,54,400
1.1.2004 To balance b/d 1,54,400 Bank a/c 1,56,800
31.12.04
To sinking fund 2,400
1,56,800 1,56,800

Interest on SFI a/c

 Date Particulars J Amount Date Particulars J Amount
f f
To Sinking Fund a/c 1980 By Bank a/c 1980
31.12.02 ________ 31.12.02 ________
1980 1980

31.12.03 To Sinking Fund a/c 4036 31.12.03 By Bank a/c 4036

______ ______
4036 4036

31.12.04 To Sinking Fund a/c 6176 31.12.04 By Bank a/c 6176

______ ______
6176 6176

Debenture a/c

Date Particulars J Amount Date Particulars J Amount

f f
31.12.01 To balance c/d 200000 1.1.01 By bank a/c 200000
200000 200000

To balance c/d 200000 1.1.2002 By balance b/d 200000

31.12.02

200000 200000
31.12.03 200000 200000
To balance c/d 1.1.2003 By balance b/d

200000 200000
31.12.04 To bank a/c 200000 By balance b/d 200000
1.1.2004

200000 200000