CA Foundation · Accounting · Company Accounts
Bhatia Ltd. issued 2,000 debentures of ₹100 each at a discount of 5%, redeemable at par after 5 years. Application money was received in full and all debentures were allotted. What amount is debited to Discount on Issue of Debentures account at the time of issue?
The discount on issue is ₹10,000. Face value of the debentures is ₹2,00,000, and 5% of this is ₹10,000. This amount is debited to Discount on Issue of Debentures account, while the company actually receives ₹1,90,000 in cash.
- A₹20,000
- B₹5,000
- C₹10,000Correct
- D₹1,90,000
Explanation
Face value = 2,000 × ₹100 = ₹2,00,000. Discount = 5% × ₹2,00,000 = ₹10,000. Cash received is ₹1,90,000, which is the amount of the bank debit, not the discount. ₹5,000 would result from wrongly taking 5% on half the face value.
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