— Kishore V, SME and ACW at Edumarz
- When an applicant is required to pay a total sum less than the face value of the debenture, it is considered to have been issued at discount.
- The discount is the difference between the face value and the issue price.
- When debentures are issued at a discount, the net sum received is subtracted from the cash account, the discount on the debentures account is debited with the amount of discount permitted, and the debentures account is credited with the full nominal value of the debentures.
- It’s worth noting that there are no legal restrictions on corporations selling discounted debentures.
- The Companies Act likewise makes no provision for a maximum discount on debentures.
- However, until the discount is written off under the heading “Miscellaneous Expenditure,“ the amount of discount must be reflected on the assets side of the Balance Sheet.