When debentures are issued at a discount?

However, shares can be issued at discount in accordance with the provisions of Section 79 of The Companies Act, 1956 which stipulates that the rate of discount must not exceed 10% of the face value while debentures can be issued at any rate of discount.

When debentures are issued at a discount the discount is written off?

When debentures are issued at discount and redeemable at premium?

When debentures are issued below its par value (or the face value) but are redeemed at price higher than its par value, then it is termed as issue of debenture at discount and redeemable at premium. The difference between the issue price and the redemption price is treated as loss on issue of debenture.

When debentures are issued at discount and are redeemable at premium the amount of discount on redemption is debited to Account?

Premium on Redemption of Debentures A/c is debited.

When debentures are issued at discount and redeemable at par?

In this case debentures are issued at discount but redeemable at par. This means that the company will get less than the face value but will redeem full face value. For example, the face value of debenture is Rs. 100 and the discount is 10%.

How would you treat discount on issue of debenture?

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.

How is the discount on issue of debenture written off?

Debenture discount can be written off in two ways:

(a) Equally over the life of the debentures. Since debentures are for five years, every year fifth of the discount can be taken to profit and loss account. (b) In the ratio of amount used.

What debenture holders will get?

Debenture holders will be paid before preferred shareholders but may be subordinate to other types of debt on the company’s books such as senior loans. If the funds allow, a debenture holder may receive their full repayment of the bond’s principal with interest.

How many types of debenture on the basis of security?

There are various types of debentures like redeemable, irredeemable/perpetual, convertible, non-convertible, fully secured, partly secured, mortgage, unsecured, naked, first mortgaged, second mortgaged, the bearer, fixed, floating rate, coupon rate, zero coupon, secured premium notes, callable, puttable, etc.

What are the types of debentures available?

How is interest calculated in debentures?

We calculate Interest on debentures at a fixed rate on its nominal (face) value payable quarterly, half yearly or yearly as per the terms of issue. The rate of interest is a prefix value to the debenture, say 9% Debentures and, therefore, is payable even if the company incurs a loss. It is a charge against profit.

When debentures are issued as collateral security interest is paid on?

When it pays the loan on the due date, the lender immediately releases the main security and these debentures. In a case where the company is unable to repay the principal amount and the interest on the loan on the due date, the lender becomes the holder of these debentures.

What is Journal of debenture issued at discount?

When debentures are issued by the company at a price less than its nominal value (face value) it is said to be issued at discount. It is important to note that the Companies Act has not put any restriction on the maximum limit of discount. For example, if a debenture of Rs.