Debentures

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

12 April 2010 On 1.04.09 P Ltd issued 1000, 15% Debentures of Rs.100 each at a discount of 10% redeemable at par.
Required to show discount on issue of debentures A/c if (a)such debentures are redeemable after 4 years and B)such debentures are redeemable by each annual drawings in 4 years.A Ltd follows financial year as its accounting Year.

shakuntala chhangani

shakuntala chhangani (Expert)
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13 April 2010 the amount of discount is Rs. 10,000.it will be expensed as follows :
(a) In case debentures are redeemable after 4 years, the amount of discount will be written off as per SLM i.e. Rs. 2,500 per annum.
(b) If the debentures are redeemable by annual drawings in 4 years then discount will be written off in the ratio of outstanding balance at the beginning of each year which , in this case, will be Rs. 1,00,000 , Rs, 75,000, Rs, 50,000 and Rs. 25,000. that is the amount Of Rs. 10,000 will be written off in 4:3:2:1.
Regards, CA Shakuntala Chhangani