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Question
Short Answer Question
What is discount on issue of debentures?
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Solution
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
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Short Answer Question
Name the head under which ‘discount on issue of debentures’ appears in the Balance Sheet of a company.
Long Answer Question
Explain the different terms for the issue of debentures with reference to their redemption.
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Pass Journal entries. Also give Journal entries for writing off Loss on Issue of Debentures.
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Statement 2 - Debenture is oral instrument acknowledging a debt under the common seal of the company"
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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"
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Discount on issue of debentures is a ______
Loss on issue of debentures is treated as ______.
Interest on debentures is calculated on ______.
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