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M.446 An Aid to Accountancy—CBSE XII

Alternative Method: Amount of subscription to be credited to Income and Expenditure
Account can be calculated in the following manner:

Particulars `
Subscription received during the year for 2017–18 1,90,000
Add: Subscription received in advance for 2017–18 (previous year) 25,000
2,15,000
Add: Subscription outstanding for 2017–18 40,000
Subscription to be credited to Income and Expenditure A/c 2,55,000

8. JOURNAL OF Z LTD.
Date Particulars L.F. Dr. (`) Cr. (`)
Machinery A/c ...Dr. 2,03,000
To K Ltd. (Note) 2,03,000
(Being machinery purchased from K Ltd.)
K Ltd. ...Dr. 2,03,000
Discount on Issue of Debentures A/c ...Dr. 10,000
To Equity Share Capital A/c 50,000
To 8% Debentures A/c 1,00,000
To Bills Payable A/c 48,000
To Securities Premium Reserve A/c (` 50,000 × 30/100) 15,000
(Being payment made to K Ltd.)

Note: Purchase consideration = ` 65,000 + ` 90,000 + ` 48,000 = ` 2,03,000.
Or
Total amount of Discount on Issue of Debentures = ` 10,00,000 × 6/100 = ` 60,000. Since
the debentures are redeemable on different dates, total amount of discount is written
off in proportion of the amount outstanding against the debentures. First redemption
of debentures is made after two years, therefore, total amount of debentures is
used for first two years. Amount used in the third year = ` 10,00,000 – ` 1,00,000
= ` 9,00,000 and, amount used in the fourth year = ` 9,00,0000 – ` 2,00,000 = ` 7,00,000
and amount used in fifth year = ` 7,00,000 – ` 3,00,000 = ` 4,00,000.
Calculation of Amount of Discount on Issue of Debentures to be Written off

At the end of Debentures Outstanding Ratio Discount to be Written off
31st March, 2013 ` 10,00,000 10 ` 60,000 × 10/40 = ` 15,000
31st March, 2014 ` 10,00,000 10 ` 60,000 × 10/40 = ` 15,000
31st March, 2015 ` 9,00,000 9 ` 60,000 × 9/40 = ` 13,500
31st March, 2016 ` 7,00,000 7 ` 60,000 × 7/40 = ` 10,500
31st March, 2017 ` 4,00,000 4 ` 60,000 × 4/40 = ` 6,000
40 ` 60,000
9. ADJUSTMENT JOURNAL ENTRY
Date Particulars L.F. Dr. (`) Cr. (`)
Z’s Current A/c ...Dr. 20,000
To X’s Current A/c 10,000
To Y’s Current A/c 10,000
(Being the rectification for adjustment of profits as per the
provisions of Indian Partnership Act, 1932)