Question

A Ltd company issued $9\%$ Debentures of the face value of Rs 6,00,000 at a discount of $5\%$ on 1st April, 2011. The debentures are repayable by annual drawing of Rs 2,00,000 commercing from the end of 4th year.

Show the 'Discount on Issue of Debentures A/c', in the company's ledger for the period of duration of debentures. Accounts are closed on 31st March each year.

Answer 1

Total Discount = $6,00,000\times \frac{5}{100}=$ Rs 30,000

As the first repayment of debentures is made after four years, therefore, the full amount of debentures Rs 6,00,000 has been utilised for the first four years. Amount utilised in fifth year amounts to Rs 6,00,000 - Rs 2,00,000 = Rs 4,00,000 and amount utilised in sixth year amounts to 4,00,000 - Rs 2,00,000 = Rs 2,00,000. Hence the amount of discount transferred to Statement of P & I. will be in the ratio of 6,00,000 : 6,00,000 : 6,00,000 : 6,00,000 :4,00,000 :2,00,000 i.e., 3:3:3:3:2:1.

$\begin{array}{cccc}\text{Year}& \text{Amount}& \text{Ratio}& \text{Amount of discount transferred}\\ & \text{Utilised}& & \text{to Statement of P and L}\\ & \text{Rs}& & \text{Rs}\text{Rs}\\ 1& 6,00,000& 3& 30,000\times 3/15=6,000\\ 2& 6,00,000& 3& 30,000\times 3/15=6,000\\ 3& 6,00,000& 3& 30,000\times 3/15=6,000\\ 4& 6,00,000& 3& 30,000\times 3/15=6,000\\ 5& 4,00,000& 2& 30,000\times 2/15=4,000\\ 6& 2,00,000& 1& 30,000\times 1/15=2,000\\ & & \overline{\underset{–}{15}}& \overline{\underset{–}{30,000}}\end{array}$

$\begin{array}{ccccccc}\text{Dr}& & & & \text{DISCOUNT ON ISSUE OF DEBENTURES ACCOUNT}& & \text{Cr}\end{array}\begin{array}{cccccc}\text{Date}& \text{Particulars}& Rs& \text{Date}& \text{Particulars}& Rs\\ 2011& & & 2012& & \\ \text{April 1}& 9\%\text{Debentures A/c}& 30,000& \text{March 31}& \text{Statement of P and L}& 6,000\\ & & & \text{March 31}& \text{Balance c/d}& 24,000\\ & & \overline{\underset{–}{\underset{–}{30,000}}}& & & \overline{\underset{–}{\underset{–}{30,000}}}\\ 2012& & & 2013& & \\ \text{April 1}& \text{Balance b/d}& 24,000& \text{March 31}& \text{Statement of P and L}& 6,000\\ & & & \text{March 31}& \text{Balance c/d}& 18,000\\ & & \overline{\underset{–}{\underset{–}{24,000}}}& & & \overline{\underset{–}{\underset{–}{24,000}}}\\ 2013& & & 2014& & \\ \text{April 1}& \text{Balance b/d}& 18,000& \text{March 31}& \text{Statement of P and L}& 6,000\\ & & & \text{March 31}& \text{Balance c/d}& 12,000\\ & & \overline{\underset{–}{\underset{–}{18,000}}}& & & \overline{\underset{–}{\underset{–}{18,000}}}\\ 2014& & & 2015& & \\ \text{April 1}& \text{Balance b/d}& 12,000& \text{March 31}& \text{Statement of P and L}& 6,000\\ & & & \text{March 31}& \text{Balance c/d}& 6,000\\ & & \overline{\underset{–}{\underset{–}{12,000}}}& & & \overline{\underset{–}{\underset{–}{12,000}}}\\ 2015& & & 2016& & \\ \text{April 1}& \text{Balance b/d}& 6,000& \text{March 31}& \text{Statement of P and L}& 4,000\\ & & & \text{March 31}& \text{Balance c/d}& 2,000\\ & & \overline{\underset{–}{\underset{–}{6,000}}}& & & \overline{\underset{–}{\underset{–}{6,000}}}\\ 2016& & & 2017& & \\ \text{April 1}& \text{Balance b/d}& 2,000& \text{March 31}& \text{Statement of P and L}& 2,000\\ & & \overline{\underset{–}{\underset{–}{2,000}}}& & & \overline{\underset{–}{\underset{–}{2,000}}}\end{array}$