Q. Om 1st April, 2014, X Ltd. issued 1,000, 10% Debentures of Rs. 100 each at a discount of 10% redeemable ar par. Show the 'Discount on issue of Debentures Account' if (a) such debentures are redeemable after 4 years, and (b) such debentures are redeemable by equal annual drawings in 4 years. X Ltd. follows financial year as its accounting year.
Dear Student
1. Here debentures shall be redeemed after 4 years, therefore discount on issue of debentures shall be written off over the life of Debentures i.e in 4 years.
2. Here Debentures are redeemed by 4 annual equal drawings, therefore debenture discount shall be written off in the ratio of debentures outstanding in the beginning of each year.
Therefore Ratio for Writing off Discount is 4:3:2:1.
Total Discount is = Rs 1,00,000 x 10% = 10,000/-
Regards
1. Here debentures shall be redeemed after 4 years, therefore discount on issue of debentures shall be written off over the life of Debentures i.e in 4 years.
| Discount on Issue of Debentures A/c | |||||||
| Cr. | |||||||
| Date | Particulars | Amt | Date | Particulars | Amt | ||
| Rs | Rs | ||||||
| 2014-15 | 2014-15 | ||||||
| 01-Apr | 10% Debentures A/c | 10,000 | |||||
| 31-Mar | Statement of Profit and Loss | 2,500 | |||||
| (10,000 x 1/4) | |||||||
| 31-Mar | Bal C/d | 7,500 | |||||
| 10,000 | 10,000 | ||||||
| 2015-16 | 2015-16 | ||||||
| 01-Apr | Bal B/d | 7,500 | |||||
| 31-Mar | Statement of Profit and Loss | 2,500 | |||||
| (10,000 x 1/4) | |||||||
| 31-Mar | Bal C/d | 5,000 | |||||
| 7,500 | 7,500 | ||||||
| 2016-17 | 2016-17 | ||||||
| 01-Apr | Bal B/d | 5,000 | |||||
| 31-Mar | Statement of Profit and Loss | 2,500 | |||||
| (10,000 x 1/4) | |||||||
| 31-Mar | Bal C/d | 2,500 | |||||
| 5,000 | 5,000 | ||||||
| 2016-17 | 2016-17 | ||||||
| 01-Apr | Bal B/d | 2,500 | |||||
| 31-Mar | Statement of Profit and Loss | 2,500 | |||||
| (10,000 x 1/4) | |||||||
| 31-Mar | Bal C/d | 0 | |||||
| 2,500 | 2,500 | ||||||
2. Here Debentures are redeemed by 4 annual equal drawings, therefore debenture discount shall be written off in the ratio of debentures outstanding in the beginning of each year.
| Year | Debenture Outstanding |
| 1 | 100000 |
| 2 | 75000 |
| 3 | 50000 |
| 4 | 25000 |
Therefore Ratio for Writing off Discount is 4:3:2:1.
Total Discount is = Rs 1,00,000 x 10% = 10,000/-
| Discount on Issue of Debentures A/c | |||||||
| Cr. | |||||||
| Date | Particulars | Amt | Date | Particulars | Amt | ||
| Rs | Rs | ||||||
| 2014-15 | 2014-15 | ||||||
| 01-Apr | 10% Debentures A/c | 10,000 | |||||
| 31-Mar | Statement of Profit and Loss | 4,000 | |||||
| (10,000 x 4/10) | |||||||
| 31-Mar | Bal C/d | 6,000 | |||||
| 10,000 | 10,000 | ||||||
| 2015-16 | 2015-16 | ||||||
| 01-Apr | Bal B/d | 6,000 | |||||
| 31-Mar | Statement of Profit and Loss | 3,000 | |||||
| (10,000 x 3/10) | |||||||
| 31-Mar | Bal C/d | 3,000 | |||||
| 6,000 | 6,000 | ||||||
| 2016-17 | 2016-17 | ||||||
| 01-Apr | Bal B/d | 3,000 | |||||
| 31-Mar | Statement of Profit and Loss | 2,000 | |||||
| (10,000 x 2/10) | |||||||
| 31-Mar | Bal C/d | 1,000 | |||||
| 3,000 | 3,000 | ||||||
| 2016-17 | 2016-17 | ||||||
| 01-Apr | Bal B/d | 1,000 | |||||
| 31-Mar | Statement of Profit and Loss | 1,000 | |||||
| (10,000 x 1/10) | |||||||
| 31-Mar | Bal C/d | 0 | |||||
| 1,000 | 1,000 | ||||||
Regards