The issue of shares at a discount means the issue of the shares at a price less than the face value of the share. For example, if a company issues share of Rs. 100 at Rs. 90, then Rs.
Which asset is discount on issue of debenture?
Discount on issue of debenture is a capital loss to the company. It should be shown in the assets side of the balance sheet as “Miscellaneous Expenditure” as fictitious asset.
What is the treatment of discount while issuing debentures?
1. Discount on issue of debentures being a capital loss, can be written off against capital profits. 2. Discount on issue of debentures can be treated as deferred revenue expenditure and written off against revenue over the period of life of the debentures.
How is discount on issue of debentures calculated?
Amount of discount to be written off from Statement of Profit and Loss every year: Nominal Value of Debentures = 3,000 × ` 100 each = ` 3,00,000 5% Discount on Issue of Debentures i.e., ` 15,000. = ` 3,000.
When debentures are issued at a Discount the Discount is written off?
Discount on issue of Debentures is Capital loss of the Company. Such loss may be written off either out of security premium or any revenue profits(P/L A/c or General Reserve).
Why is debenture issued?
The loan is issued to corporates based on their reputation at a fixed rate of interest. Debentures are also known as a bond which serves as an IOU between issuers and purchaser. Companies use debentures when they need to borrow the money at a fixed rate of interest for its expansion.
How is the discount on issue of debentures written off?
Discount on issue of debentures can be treated in any of the following two ways: 1. Discount on issue of debentures being a capital loss, can be written off against capital profits. 2. Discount on issue of debentures can be treated as deferred revenue expenditure and written off against revenue over the period of life of the debentures.
Which is the issue of 10% debentures in India?
(a) A Ltd. issued 5,000 10% Debentures of Rs. 100 each at a discount of 5% and redeemable at the end of 5 years at par. (b) B Ltd. issued 5,000 12% Debentures of Rs. 100 each at par and redeemable at the end of 5 years at a premium of 5%.
How are share capital, debentures and issue of securities different?
[i.e. equity shares, fully convertible debentures, partly convertible debentures or any other securities, which would be convertible into or exchanged with equity shares at a later date] to a select group of persons to any select person or group of persons on a preferential basis
How is application money transferred to debentures account?
1. On receipt of Application Money Amount Cr. To Debentures Application A/c Cr. 2. On allotment, the application money on debentures allotted is transferred to debentures account Amount Cr. To Debentures A/c Cr. (Being the transfer of application money on debentures allotted to the debentures account.)
