DISCOUNT ON ISSUE OF DEBENTURES AND LOSS ON ISSUE OF DEBENTURES
In case company issues debentures on discount the total amount of discount is not charged to profit and Loss Account of the company in the accounting
year in which this discount is allowed. The amount of such discount is very heavy and to the company gets benefit from the loan by issuing debentures over a number of years. Hence some part of the amount of discount is written off every year. Generally it is written off prior to the redemption of these debentures.
As the amount of discount on issue of debentures is treated as a capital loss, it is shown on the asset side of the balance sheet of the company under the head “Miscellaneous Expenditure” until and by the amount it is not written off.
The amount of debenture discount can be written off in two ways :
1. All debentures are to be redeemed after a fixed period.
When the debentures are to be redeemed after a fixed period, the amount of discount will be distributed equally within the number of years spreaded between the issue of debentures and their redemption. The amount of discount on issue of debentures to be written off each year is calculated as
Amount of discount to be written off annually
Bookmark this post: | 
|
Save And Share :
0 comments:
Post a Comment