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 discount on issue of shares?
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. 10 (i.e. Rs 100—90) is the amount of discount.
What is received on issue of debentures?
When the payment received and the nominal value of the debentures are same then it is the case of ‘Issue of Debentures at Par’. In other terms, it is when the issue price is equivalent to the face value. For example, Issue of Debentures of Rs. 1,000 for Rs.
Under which head discount on issue of debentures shown?
As we know that Discount on Issue of debentures is a capital loss and it will be written off out of the profit of coming years Therefore it is shown on the Assets side of the Balance Sheet under the heading of “Miscellaneous Expenditures” until it is written off.
How would you treat discount on issue of debenture?
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.
What is the treatment of discount on issue of debentures in cash flow statement?
The increase in discount should be deducted from the face value of shares / Debentures and only net proceeds shall be treated as cash flow from Financing Activities. Decrease in Discount on issue of Shares/Debentures will be added back to current year’s profit to calculate ‘Cash from Operating Activities’.
Can we issue shares at discount?
As per companies Act 2013, a company shall not issue shares at a discount except as provided in section 54 for issue of sweat equity shares. Any share issued by a company at a discounted price shall be void.
What are the stages of issue of debentures?
Approval of Form No. PAS – 5. Sanction of Debenture Trustee Agreement and appointment of a Debenture Trustee. Appointment of an expert for approval of increase of borrowing powers, if required.
Is there a loss or discount on issue of debentures?
The loss or discount on issue of debentures is typically a capital loss or a fictitious asset and, hence, has to be written-off during the debentures’ lifetime.
Are there journal entries in connection with issue of debentures?
There are different journal entries in connection with the issue of debentures. 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.
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.)
What is percentage of debentures to be transferred to redemption reserve?
Question 25. According to SEBI guidelines what percentage of the amount of debentures must be transferred to Debenture Redemption Reserve, before the commencement of redumption of debentures, in case of convertible debentures ? Question 26. Profit on redemption of debentures in transferred to which account ?
