A Company Issued Debentures Of the Face Value Of Rs 5,00,000 At a Discount Of 6% On April 01, 2012-Accountancy

A company issued debentures of the face value of Rs 5,00,000 at a discount of 6% on April 01, 2012. These debentures are redeemable by annual drawings of Rs,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.

Journal

Date	Particulars		L.F.	Amount (Dr.)	Amount (Cr.)
2012
April,01	Bank A/c	Dr.		4,70,000
	To Debenture Application A/c and Allotment A/c				4,70,000
	(Being debenture Application and Allotment A/c)
April,01	Debenture Application A/c and Allotment A/c	Dr.		4,70,000
	Discount on Issue of Debenture A/c	Dr.		30,000
	To Debenture A/c				5,00,000
	(Being Debenture Application money transferred to debenture A/c)

Amount of discount on Issue of Debenture 

= 5,00,000 ྾ `\frac{6}{100}`=30,000

Year	Debenture Outstanding	Ratio	Amount Written off every year
2012	5,00,000	5	30,000 x`\frac{5}{15}`	10,000
2013	5,00,000	4	30,000 x`\frac{4}{15}`	8,000
2014	5,00,000	3	30,000 x`\frac{3}{15}`	6,000
2015	5,00,000	2	30,000 x`\frac{2}{15}`	4,000
2016	5,00,000	1	30,000 x`\frac{1}{15}`	2,000
		15		1

Date	Particulars		L.F.	Amount (Dr.)	Amount (Dr.)
2013
March 31	Profit and loss A/c	Dr.		10,000
	To Discount on Issue of Debenture				10,000
	(Being Debenture issued on discount written off)
2014
March 31	Profit and loss A/c			8,000
	To Discount on Issue of Debenture				8,000
	(Being Debenture issued on discount written off)
2015
March 31	Profit and loss A/c			6,000
	To Discount on Issue of Debenture				6,000
	(Being Debenture issued on discount written off)
2016
March 31	Profit and loss A/c			4,000
	To Discount on Issue of Debenture				4,000
	(Being Debenture issued on discount written off)
2017
March 31	Profit and loss A/c			2,000
	To Discount on Issue of Debenture				2,000
	(Being Debenture issued on discount written off)

Chapter-2 Issue and Redemption of Debentures-II

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