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Question -

A company issued debentures of the face value of ₹ 5, 00,000 at a discount of 6% on April 01, 2012. These debentures are redeemable by annual drawings of ₹, 1, 00,000 made on March 31 each year. The directors decided to write off discount based on the debentures outstanding each year.

Calculate the amount of discount to be written-off each year. Give journal entries also.



Answer -

Journal

 

Date

Particulars

L.F.

Debit

Amount

₹

Credit

Amount

₹

2012

Apr 1

 Bank A/c

Dr.

4,70,000

To Debenture Application and Allotment A/c

4,70,000

(Debenture Application money received)

Apr 1

Debenture Application and Allotment A/c

Dr.

4,70,000

Discount on Issue of Debenture A/c

Dr.

30,000

To Debentures A/c

5,00,000

(Debenture Application money transferred to Debenture Account)


Assuming that theamount of discount on issue of debentures is to be written off in 5 years.

Year

Debenture outstanding

Ratio

Amount written off

2012

5,00,000

5

=

10,000

2013

4,00,000

4

=

8,000

2014

3,00,000

3

=

6,000

2015

2,00,000

2

=

4,000

2016

1,00,000

1

=

2,000

15

30,000

Date

Particulars

L.F.

Debit

Amount

₹

Credit

Amount

₹

2013

Mar 31

Profit and Loss A/c

Dr.

10,000

To Discount on Issue of Debentures A/c

10,000

(Discount on issue of debentures written off)

2014

Mar 31

Profit and Loss A/c

Dr.

8,000

To Discount on Issue of Debentures A/c

8,000

(Discount on issue of debentures written off)

2015

Mar 31

Profit and Loss A/c

Dr.

6,000

To Discount on Issue of Debenture A/c

6,000

(Discount on issue of debentures written off)

2016

Mar 31

Profit and Loss A/c

Dr.

4,000

To Discount on issue of Debentures A/c

4,000

(Discount on issue of debenture written off)

2017

Mar 31

Profit and Loss A/c

Dr.

2,000

To Discount on Issue of Debenture A/c

2,000

(Discount on issue of debenture written off)

 

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