Page 167 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

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
Accounting for Companies-I
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
Notes
1.1.03 – 31.3.03 1,20,000 3 3,60,000 10,80,000 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 3 1,20,000 120,000 1
60

Amount of discount to be written off
Year Calculation Amount of discount to be written off ( )
2000 15 3,000
12,000 ×
60
2001 17 3,400
12,000 ×
60
2002 13 2,600
12,000 ×
60
2003 9 1,800
12,000 ×
60
2004 5 1,000
12,000 ×
60
2005 1 200
12,000 ×
60
12,000

Self Assessment

State whether the following statements are true or false:
6. If debentures are issued at par and redeemable at premium, loss on issue of debentures
will be equal to the amount of premium payable on redemption.
7. If debentures are issued at discount and redeemable at premium, loss on issue of debentures
will not be equal to the total of discount on issue of debentures and premium payable on
redemption of debentures.
8. When debentures are redeemable at the end of a specified period, total discount on the
issue of debentures is spread over the life of debentures equally.
9. The ‘loss on issue of debentures account’ is a nominal account.

!
Caution If a company does not have any capital reserve it must be written off against the
profits of the company in an equitable basis until debentures are redeemed.

7.3 Loss on Issue of Debentures

The loss on issue of debentures will be computed in the following manner:
(a) If debentures are issued at par and redeemable at premium, loss on issue of debentures
will be equal to the amount of premium payable on redemption.

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