Question

A company issued 10% debentures of the face value of Rs. 1,20,000 at a discount of 6% on April 01, 2011. The debentures are payable by annual drawings of Rs. 40,000 commencing from the end of third year. How will you deal with discount on debentures? Show the discount on debentures account in the company ledger for the period of debentures. Assume accounts are closed on March 31 every year.

Answer 1

(i) Working Note:

Amount of Discount on Issue of Debenture = 1,20,000 x \(\frac{6}{100}\) = 7,200