Advertisements
Advertisements
प्रश्न
Long Answer Question
How is ‘Discount on Issue of Debentures’ treated in the books of accounts? How will you deal with the ‘discount in issue of debentures’ when the debentures are to be redeemed in instalments?
Advertisements
उत्तर
When the debentures are issued at a price below its par value or face value, then it is said that the debentures are issued at discount. The difference between the issue price and the face value of the debenture is regarded as a capital loss. As per the Revised Schedule VI of the Companies Act, Discount on Issue of Debentures is shown in the Notes to Accounts:
1. With the amount that is to be written off within 12 months from the date of Balance Sheet - Shown under Other Current Assets
2. With the amount that is to be written off after 12 months from the date of Balance Sheet - Shown under Other Non-Current Assets
Accounting Treatment
For example, if a company has issued 10% debentures of Rs 6,00,000 at 5% discount redeemable annually by Rs 2,00,000 each year. The total amount of discount on Rs 6,00,000 debentures @ 5% is Rs 30,000, i.e. (6,00,000 × 5/100 = Rs 30,000). The accounting treatment for discount on issue of debentures(if it is to be written-off in 5 years) is:
Year 1: Amount to be written-off each year = `30,000 × 15=6,000"> Shown in Statement of Profit and Loss
Amount to be written-off in the next year = 6,000 - Shown as Other Current Assetunder Current Assets
Remaining Amount to be written-off after next year = 30,000 - 6,000 - 6,000= 18,000"> Shown as Other Non-Current Assetunder Non-Current Assets
| Statement of Profit and Loss for year ended... |
|||
| S. No. | Particulars | Note No. | Amount |
| I | Revenue from Operations | ||
| II | Other Income | ||
| III | Total Revenue (I + II) | ||
| IV | Expenses: | ||
| Amortisation Expenses (Discount on issue of debentures written-off) | 6,000 | ||
|
Extract of Balance Sheet
as on March 31, 2013
|
||
| Particulars | Note No. | Amount (Rs) |
| II. Assets | ||
| 1. Non-Current Assets | ||
|
(e) Other Non-Current Assets
|
1 | 18,000 |
| 2. Current Assets | ||
|
(f) Other Current Assets
|
2 | 6,000 |
| Note No. | Particulars | Amount (Rs) |
| 1 | Other Non-Current Assets | |
| Discount of Issue of Debentures | 18,000 | |
| 2 | Other Current Assets | |
| Discount of Issue of Debentures | 6,000 |
Amount to be written-off = `30,000 xx (1/5) = 6,000`- Shown in Statement of Profit and Loss
Amount to be written-off in the next year = 6,000 - Shown as Other Current Asset under Current Assets
Remaining Amount to be written-off after next year = `18000 - 6000 = 12000` - Shown as Other Non-Current Asset under Non-Current Assets
At the end of Year 5, the amount of discount on issue of debentures will be completely written off.
APPEARS IN
संबंधित प्रश्न
Long Answer Question
Describe the meaning of ‘Debenture Issued as Collateral Securities’. What accounting treatment is given to the issue of debentures in the books of accounts?
B. Ltd. issued debentures at 94% for Rs 4,00,000 on April 01, 2011 repayable by five equal drawings of Rs 80,000 each. The company prepares its final accounts on March 31 every year.
Indicate the amount of discount to be written-off every accounting year assuming that the company decides to write-off the debentures discount during the life of debentures. (Amount to be written-off: 2012 Rs 8,000; 2013 Rs 6,400; 2014 Rs 4,800; 2015 Rs 2,000; 2016 Rs 1,600).
Vishwas Ltd. issued 2,000; 9% Debentures of ₹ 100 each payable as follows:
₹ 25 on application; ₹ 25 on allotment and ₹ 50 on first and final call.
Applications were received for all the debentures along with the application money did allotment was made . Call money was also received on the due date.
Pass necessary Journal entries in the books of the company.
Raj Ltd . issued 5,000; 8% Debentures of ₹ 100 each at a premium of 5% payable as follows:
₹ 10 on application ; ₹ 20 along with premium on allotment and balance on first and final call.
Pass necessary Journal entries.
Deepak Ltd purchased furniture of ₹ 2,20,000 from M/s. Furniture Mart. 50% of the amount was paid to M/s. Furniture Mart by accepting a bill of exchange and for the balance, the company issued 9% debentures of ₹ 100 each at a premium of 10% in favor of M/s. Furniture Mart.
Pass Journal entries in the books of Deepak Ltd.
Romi Ltd. acquired assets of ₹ 20 lakhs and took over creditors of ₹ 2 lakhs from Kapil Enterprises.
Romi Ltd. issued 8% Debentures of ₹ 100 each at a premium of 25% as purchase consideration.
Record necessary journal entries in the books of Romi Ltd.
XYZ Ltd.issued 5,000 , 10% Debentures of ₹ 100 each on 1st April, 2015 at a discount of 10% redeemable at a premium of 10% after 4 years. Give journal entries for the year ended 31st March, 2016, assuming that the interest was payable half-yearly on 30th September and 31st March. Tax is to be deducted @ 10%.
On 1st January, 2017, Raha Ltd. issued 6,000, 8% Debentures of nominal (face) value of ₹ 100 each redeemable at 5% premium in equal proportions at the end of 5, 10 and 15 years. It has a balance of ₹ 10,000 in Securities Premium Reserve.
Pass Journal entries. Also give Journal entries for writing off Loss on Issue of Debentures.
Global Ltd. issued 10,000, 8% Debentures of ₹ 100 each redeemable in four equal instalments by draw of lots from the end of 3 years at a premium of ₹ 9.
Pass the Journal entries for writing off the Loss on Issue of Debentures. Also prepare Loss on issue of Debentures Account.
X Co. Ltd. purchased assets worth Rs.28,80,000. It issued debentures of Rs. 100 each at a discount of 4 per cent in full satisfaction of the purchase consideration. The number of debentures issued to vendor is ______.
Excess value of net assets over purchase consideration at the time of purchase of business is credited to ______.
Which of the following given statement is correct.
Statement 1 - "Shares cannot be converted into debentures whereas debentures can be converted into shares"
Statement 2 - "Shares can be converted into debentures whereas debentures cannot be converted into shares"
The debentures are issued with a specified rate of interest, which is called the coupon rate are known as which types of debentures?
Which of the following. column indicated in·the statement given below is to be credited?
"Writing off the loss on issue of debentures"
Which of the following is true with regard to 10% Debentures issued at a discount of 20%?
Rehana, Shakina and Jasmine are partners. They share When debentures are issued as collateral security, the final entry for recording the transaction in the books is ______.
Interest on Debentures is a charge against ______.
Debenture is ______.
