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M.56 Management Accounting (Section B)—ISC XII

(c)
Dr. LOSS ON ISSUE OF DEBENTURES ACCOUNT Cr.
Year Particulars ` Year Particulars `

I To 10% Debentures A/c 60,000 I By Statement of Profit and Loss 40,000
To Premium on Redemption of (Finance Cost)
Debentures A/c 1,00,000 By Balance c/d 1,20,000
1,60,000 1,60,000
II To Balance b/d 1,20,000 II By Statement of Profit and Loss 40,000
(Finance Cost)
By Balance c/d 80,000
1,20,000 1,20,000
III To Balance b/d 80,000 III By Statement of Profit and Loss 36,000
(Finance Cost)
By Balance c/d 44,000
80,000 80,000
IV To Balance b/d 44,000 IV By Statement of Profit and Loss 28,000
(Finance Cost)
By Balance c/d 16,000
44,000 44,000
V To Balance b/d 16,000 V By Statement of Profit and Loss 16,000
(Finance Cost)
Working Note:
Calculation of amount of Loss on Issue of Debentures to be written off:

Year Debenture Outstanding Ratio Amount of Loss to be
Written off each year (`)
1st ` 20,00,000 10 ` 1,60,000 × 10/40 = 40,000

2nd ` 20,00,000 10 ` 1,60,000 × 10/40 = 40,000
3rd ` 18,00,000 9 ` 1,60,000 × 9/40 = 36,000
4th ` 14,00,000 7 ` 1,60,000 × 7/40 = 28,000
5th ` 8,00,000 4 ` 1,60,000 × 4/40 = 16,000
Total 40 = 1,60,000

6. (a) JOURNAL OF MOON LTD.
Date Particulars L.F. Dr. (`) Cr. (`)
2019
Oct. 1 Own Debentures A/c ...Dr. 27,900
To Bank A/c 27,900
(Being the purchase of 300 own debentures @ ` 93)
10% Debentures A/c ...Dr. 30,000
To Own Debentures A/c 27,900
To Gain (Profit) on Cancellation of Own Debentures A/c 2,100
(Being the cancellation of 300 own debentures)