Page 166 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Particulars
(`)
Particulars
(`)
3,33,333

By Balance c/d
6,66,667

Year To 15% Debentures Account 10,00,000 Year By P&L Account 10,00,000

10,00,000
To Balance b/d 6,66,667 By P&L Account 2,66,667
By Balance c/d 4,00,000
6,66,667 6,66,667
Unit 7: Debentures: Conditions of Issue of Debentures from Redemption Point of View
To Balance b/d 4,00,000 By P&L Account 2,00,000
By Balance c/d 2,00,000
4,00,000 4,00,000
To Balance b/d 2,00,000 By P&L Account 1,33,333 Notes
By Balance c/d 66,667
2,00,000 2,00,000
To Balance b/d 66,667 By P&L Account 66,667

66,667 66,667

Working Note: Table showing Debenture Discount to be written off every year—
Year Nominal value of Period of use Product Ratio Amount of Discount to be
Debentures used (`) in months (Product) written off every year
2,00,00,000 12 months 24,00,00,000 5 5
10,00,000× = 3,33,333
15
1,60,00,000 12 months 19,20,00,000 4 4
10,00,000× = 2,66,667
15
1,20,00,000 12 months 14,40,00,000 3 3
10,00,000× = 2,00,000
15
80,00,000 12 months 9,60,00,000 2 2
10,00,000× = 1,33,333
15
40,00,000 12 months 4,80,00,000 1 1
10,00,000× = 6,66,667
15
15

200,00,000 × 5
`
Total discount on Debentures = = 10,00,000
100
Example 4: Debentures Discount – When first redemption is made in next accounting
period

Rita Ltd. issued 12% Debentures at 94% for ` 2,00,000 on 1st April, 2,000 repayable by five equal
annual drawings of ` 40,000 each. The company closes its account on a calendar year basis.
Indicate the amount of discount to be written off every accounting year assuming that the
company decides to write off the debenture discount during the life of debentures.
Solution:

2,00,000 6
Total Discount = ` 12,000
100
Table showing the discount to be written off each year

Year Nominal value of Period of use in Product Equivalent Ratio
debentures (`) months amount
1.4.2000 – 31.12.00 2,00,000 9 18,00,000 18,00,000 15
1.1.01 – 31.3.01 2,00,000 3 6,00,000 17
1.4.01 – 31.12.01 1,60,000 9 14,40,000 20,40,000
1.1.02 – 31.3.02 1,60,000 3 4,80,000 15,60,000 13
1.4.02 – 31.12.02 1,20,000 9 10,80,000
1.1.03 – 31.3.03 1,20,000 3 3,60,000 10,80,000 Contd...
9
1.4.03 – 31.12.03 80,000 9 7,20,000
1.1.04 – 31.3.04 80,000 3 2,40,000 6,00,000 5
1.4.04 – 31.12.04 40,000 9 3,60,000
1.1.05 – 31.3.05 40,000 LOVELY PROFESSIONAL UNIVERSITY 1 159
120,000
1,20,000
3
60