Other Cases - Issue of Debentures Notes | Study Crash Course of Accountancy - Class 12 - Commerce

Commerce: Other Cases - Issue of Debentures Notes | Study Crash Course of Accountancy - Class 12 - Commerce

The document Other Cases - Issue of Debentures Notes | Study Crash Course of Accountancy - Class 12 - Commerce is a part of the Commerce Course Crash Course of Accountancy - Class 12.
All you need of Commerce at this link: Commerce

Consideration Other Than Cash:
Case 1. When assets are purchased
Assets a/c
      To vendor a/c
Case 2. When assets are liabilities both are purchased (running business is purchased)
Assets a/c
        To liabilities a/c
        To vendor a/c (difference amount)
Case 3. When assets and liabilities both are purchased and the amount of vendor is also given and there is a difference in the debit side (cr. Side > dr. side)-for the difference amount goodwill be raised in dr. side
Assets a/c
Goodwill a/c (difference amount)
        To liabilities a/c

        To vendor a/c 

Case 4. When assets and liabilities both are purchased and the amount of vendor is also given and there is a difference in the credit side (Dr. Side > Cr. side)-for the difference amount capital reserve be raised in cr. side
Assets a/c
       To liabilities a/c
       To vendor a/c
       To capital reserve a/c (difference amount)

Settlement of vendor’s account:
Amount of vendor is also known as Purchase consideration, agreed sum, agreed value, business price, purchased sum, supplier or creditor of a capital expenditure (fixed assets)
Case 1. vendor is paid by cheque or a bank draft
Vendor a/c
        To bank a/c
Case 2. vendor is paid in cash
Vendor a/c
        To cash a/c
Case 3. vendor is paid by issuing bills of exchange, promissory note and bills payable
Vendor a/c
        To B/P a/c
Case 4. vendor is paid by issuing debentures
 At par (Fv=Mv)
Vendor a/c
        To 10% debentures
 At a premium (Fv + Premium= Mv)
Vendor a/c
        To 10% debentures
        To S.premium (difference amount)

 At a discount (Fv-discount = Mv)
Vendor a/c
Discount on issue (difference amount)
        To 10% debentures
Amount of 10% debentures = vendor x FV

                                                     MV
number of 10% debentures = vendor
                                                     MV

As A Colleteral Security:
 For bank loan
Bank a/c
       To Bank Loan a/c
 For issuing debentures as a collateral security:
10 % Debenture suspense a/c
       To 10 % Debenture
Disclosure in the balance sheet:
Alfa Ltd. obtained Loan of 1, 00,000 from Indian Bank and issued 1200, 10% Debentures of 100 each as Collateral security. (or any other example) Treatment:
 An extract of Balance sheet of Alfa Ltd.
as at ----------------

ParticularsNote No.Rs.
Equity And Liabilities
Non- current liabilities
Long Term Borrowings


1


1,00,000

Note to Accounts:

Note No.
Particulars
Rs.
1Long Term Borrowings
Loan from Indian Bank
1,200. 10% Debentures of Rs. 1,00 each issued as collateral security 1,20,000
less: debenture suspense                                                                           (1,20,000)

1,00,000

______


1,00,000


Treatment of Interest:
Interest is a nominal account and is an expense for the business so it is always debited. When interest is paid:

Interest on debentures a/c
      To bank a/c
When interest is not paid:
 Interest on debentures a/c
        To O/S Interest on debentures a/c
When Interest is Transferred to Statement of P&L A/c at the end of year:
Statement of P&L a/c
      To Interest on debentures a/c
Treatment of Interest with income tax (T.D.S.):
1) Interest on debentures a/c
       To debenture holders a/c
       To income tax payable a/c
2) debenture holders a/c
     income tax payable a/c
              To Bank a/c

Debentures are issued in cash:

Case
Issue
Redemption(repayment)
1At par(issued at 100)
Bank a/c            100
   To 10% debenture application& allotment a/c 100

10% debenture application& allotment a/c 100
   To 10% debenture a/c                                           100
At par(repayable at 100)
10% debenture a/c                   100
   To debenture holder a/c                   100

debenture holder a/c      100
   To bank a/c                              100
2At premium(issued at 110)
Bank a/c            110
   To 10% debenture application& allotment a/c 110

10% debenture application& allotment a/c 110
   To 10% debenture a/c                                           100
   To security premium a/c                                        10
At par(repayable at 100)
10% debenture a/c                   100
  To debenture holder a/c                    100

debenture holder a/c  100
   To bank a/c                         100
3At discount (issued at 90)
Bank a/c            90
   To 10% debenture application& allotment a/c 90

10% debenture application & allotment a/c 90                 discount on issue a/c                                   10
    To 10% debenture a/c                                  100
At par(repayable at 100)
10% debenture a/c     100
   To debenture holder a/c     100

debenture holder a/c
   To bank a/c     100
4At par(issued at 100)
Bank a/c            100
   To 10% debenture application& allotment a/c 100

10% debenture application& allotment a/c 100
loss on issue a/c                                             10
    To 10% debenture a/c                                           100       To premium on redemption a/c                            10
At premium(repayable at 110)
10% debenture a/c                   100
premium on redemption a/c     10
    To debenture holder a/c                110

debenture holder a/c      110
     To bank a/c                             110
5At premium(issued at 105)
Bank a/c            105
   To 10% debenture application& allotment a/c 105

10% debenture application& allotment a/c 105
loss on issue a/c                                             10
   To 10% debenture a/c                                           100
   To security premium a/c                                         5         To premium on redemption a/c                              10
At premium(repayable at 110)
10% debenture a/c                  100
premium on redemption a/c   10
   To debenture holder a/c                 110

debenture holder a/c      110
    To bank a/c                           110
6At discount (issued at 90)
Bank a/c            90
   To 10% debenture application& allotment a/c 90

10% debenture application& allotment a/c 90 discount on issue a/c                                   10
loss on issue a/c                                            10
   To 10% debenture a/c                                           100       To premium on redemption a/c                           10
At premium(repayable at 110)
10% debenture a/c                     100
premium on redemption a/c      10
    To debenture holder a/c                   110

debenture holder a/c      110
    To bank a/c                             110


Writing-off Discount/Loss on Issue of Debentures:
• The discount/loss on issue of debentures is a capital loss or a fictitious asset and, therefore, must be written-off during the life time of debentures.
• The amount of discount/loss on issue of debentures should normally not be written-off in the year of issue itself since the benefit of the debentures would accrue to the company till their redemption.
• The discount/loss on it is, therefore, treated as capital loss. The discount may be charged to securities premium A/c or may be written-of fover 3 to 5 years through statement of profit and loss as per guidelines issued by ICAI. On the asset side of Balance Sheet.

The document Other Cases - Issue of Debentures Notes | Study Crash Course of Accountancy - Class 12 - Commerce is a part of the Commerce Course Crash Course of Accountancy - Class 12.
All you need of Commerce at this link: Commerce

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