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Question -

A company issued 10% Debentures of the face value of ₹, 1, 20,000 at a discount of 6% on April 01, 2011. The debentures are payable by annual drawings of ₹ 40,000 commencing from the end of third year.
How will you deal with discount on debentures?
Show the discount on debentures account in the company ledger for the period of duration of debentures. Assume accounts are closed on March 31 every year.



Answer -

In the books of……………

Journal

Date

Particulars

L.F.

Debit

Amount

₹

Credit

Amount

₹

2011

Apr. 01

Bank A/c

Dr.

1,12,800

To Debenture Application and Allotment A/c

1,12,800

(Debentures Application Money received)

Apr. 01

Debentures Application and Allotment A/c

Dr.

1,12,800

Discount on issue of Debenture A/c

Dr.

7,200

To 10% Debenture A/c

1,20,000

(Debenture Application Money transferred to Debenture Account)

2012

Mar. 31

Profit and Loss A/c

Dr.

1,800

To Discount on Issue of Debentures A/c

1,800

(Discount on issue of debenture written off)

2013

Mar. 31

Profit and Loss A/c

Dr.

1,800

To Discount on Issue of Debenture A/c

1,800

(Discount on issue of debenture written off)

2014

Mar. 31

Profit and Loss A/c

Dr.

1,800

To Discount on Issue of Debenture A/c

1,800

(Discount on issue of debenture written off)

2015

Mar. 31

Profit and Loss A/c

Dr.

1,200

To Discount on Issue of Debentures A/c

1,200

(Discount on issue of debenture written off)

2016

Mar. 31

Profit and Loss A/c

Dr.

600

To Discount on Issue of Debentures A/c

600

(Discount on issue of debenture written off)

Discount on Issue of Debentures

Dr.

Cr.

Date

Particulars

J.F.

Amount

₹

Date

Particulars

J.F.

Amount

₹

2011

Apr. 01

10% Debentures

7,200

2012

Mar. 31

Profit and Loss

1,800

Balance c/d

5,400

7,200

7,200

2012

Apr. 01

Balance b/d

5,400

2013

Mar. 31

Profit and Loss

1,800

Balance c/d

3,600

5,400

5,400

2013

Apr. 01

Balance b/d

3,600

2014

Mar. 31

Profit and Loss

1,800

Balance c/d

1,800

3,600

3,600

2014

Apr. 01

Balance b/d

1,800

2015

Mar. 31

Profit and Loss

1,200

Balance c/d

600

1,800

1,800

2015

Apr. 01

Balance b/d

600

2016

Mar 31

Profit and Loss

600

600

600

i)Working Note:

Amount of Discount onIssue of Debenture:

Year

Debenture Outstanding

Ratio

Amount written off every year

2011-12

1,20,000

3

=

1,800

2012-13

1,20,000

3

=

1,800

2013-14

1,20,000

3

=

1,800

2014-15

80,000

2

=

1,200

2015-16

40,000

1

=

600

12

 ₹ 7,200

 

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