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Treatment of Loss on Issue of Debenture Video Lecture | Accounting for Grade 12

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FAQs on Treatment of Loss on Issue of Debenture Video Lecture - Accounting for Grade 12

1. What is the treatment of loss on the issue of debenture?
Ans. The treatment of loss on the issue of debenture involves recognizing the loss as an expense in the financial statements. The loss is typically calculated as the difference between the nominal value of the debenture and the amount received from the issue. This loss is then recorded in the income statement as an expense, thereby reducing the company's net income.
2. How is the loss on the issue of debenture reflected in the financial statements?
Ans. The loss on the issue of debenture is reflected in the financial statements as an expense in the income statement. It is deducted from the company's revenue to calculate the net income. The loss is also disclosed in the notes to the financial statements, providing detailed information about the circumstances leading to the loss and its impact on the company's financial position.
3. Can a loss on the issue of debenture be recovered in the future?
Ans. No, a loss on the issue of debenture cannot be recovered in the future. Once the loss is recognized and recorded in the financial statements, it becomes a permanent reduction in the company's net income. The loss represents a decrease in the value of the debenture issued and cannot be reversed or recovered in subsequent periods.
4. How does the treatment of loss on the issue of debenture affect the company's financial position?
Ans. The treatment of loss on the issue of debenture reduces the company's net income, which in turn affects its retained earnings. The lower net income decreases the company's profitability and may also impact its ability to distribute dividends to shareholders. Additionally, the loss reduces the value of the debenture on the company's balance sheet, potentially affecting its overall financial position.
5. Are there any tax implications associated with the loss on the issue of debenture?
Ans. The tax implications associated with the loss on the issue of debenture depend on the tax laws and regulations of the specific jurisdiction. In some cases, the loss may be tax-deductible, reducing the company's taxable income and potentially resulting in lower tax expenses. However, it is essential to consult with tax professionals or refer to the relevant tax laws to determine the specific tax treatment of such losses.
57 videos|79 docs|68 tests
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