Debenture is a certificate/instrument acknowledging a debt. It is issued generally by a public company to individuals/institutions who lend it money (invest in their debentures)For an investor investing in a debenture is just like investing in a fixed deposit with the difference that while he can withdraw the amount invested in a fixed deposit any time he/she likes with a loss of interest.. He cannot do so with a debenture. The amount invested on a debenture will be repaid only on the expiry of the period for which the debenture has been issued. If the debentures were originally issued at a discount and redeemed at premium then the case of loss on issue of debentures arise.

Here A company issued Rs. 1,00,000 15% Debentures at a discount of 5% redeemable after 10 years at a premium of 10%.

The discount on issue of debentures = 5% of 1,00,000 = Rs. 5,000

The premium on redemption of debentures = 10% of 1,00,000 = Rs. 10,000

Thus total loss on issue of debentures = 5,000 + 10,000 = Rs. 15,000

Goods distributed for charity should be credited to purchases.

Remuneration paid for services is called commission. Commission is always paid on sales. Over-riding commission is an extra commission allowed to the consignee in addition to the normal commission. Such additional commission is generally allowed:

(i) To provide additional incentive to the consignee for the purpose of introducing and creating a market for a new product

(ii) To provide incentive for supervising the performance of other agents in a particular area

(iii) To provide incentive for ensuring that the goods are sold by the consignee at the highest possible price.

Here Consignee is entitled to get a commission of Rs. 25 per article sold plus one fourth of the amount by which gross sale proceeds less his total commission thereon exceeded a sum at the rate of Rs. 125 per articles sold.

Articles sold = 450

So basic commission = 450 × 25 = Rs. 11,250

Let the total commission be x (say)

Extra commission = 1/4(sales proceeds – x – 125 × articles sold) = 1/4 of (73,800 – x – 125 × 450)

Or x – 11,250 = 1/4 (17,550 – x)

Or 4 (x – 11,250) = 17,550 – x

Or 4x – 45,000 = 17,550 – x

Or 5x = 62,550

Or x = Rs. 12,510 = total commission.

When the shares forfeited are reissued at discount, Bank account is debited by the amount received and Share capital account is credited by the paid up amount.

The amount of discount allowed is debited to Share Forfeited Account. This is for adjusting the amount of discount so allowed from the amount forfeited at the time of forfeiture.

Now the amount of discount allowed on reissue of shares at the most can be equal to the forfeited amount on such shares. In that case the share forfeited account after reissue will show a zero balance.

But in case, this amount of discount is less than the amount forfeited, the remaining forfeited amount will be profit for the company. This profit is a capital gain to the company and is transferred to Capital Reserve account.

In the above question discount on shares reissued = number of shares reissued × discount allowed per share = 20 × 15 = Rs. 300

Amount available for the reissued shares in shares forfeiture account = number of shares reissued × amount forfeited per share = 20 × (20) = Rs. 400

The surplus amount to be transferred to capital reserve account = 400 – 300 = Rs. 100

Value of inventory just before being unloaded at the consignees godown

= Cost of Goods + Consignors Direct Expenses + Proportionate Consignee Direct Expenses

The cost of the goods/inventory implies the value at which the goods are consigned by the consignor to the consignee. Since the goods have reached the consignees godown, we can consider the consignor expenses on the goods to have been incurred. Moreover any direct expenses incurred by the consignee in relation to the transportation of the goods, octroi duties, insurance in transit etc., would also have to be considered as having been incurred on the goods.

Therefore, the direct expenses incurred till that point would include the consignor expenses and that part of the consignee expenses which relate to the expenses incurred on the stock before being unloaded.

Here Expenses incurred by the consignor on sending goods to consignee are Rs. 1,000 for packing, Rs. 1,500 on freight and Rs. 500 for insurance, while expenses incurred by the consignee on behalf of consignment are Rs. 300 on Octroi, Rs. 800 Godown rent and Rs. 1,000 selling expenses.

So Expense amount to be excluded while calculating consignment inventory will be = godown rent + selling expenses = 800 + 1,000 = Rs. 1,800

When a new partner comes into the business, old partners have to give him his profit share from their portion. Thus change in profit sharing ratio is an important aspect to be considered on reconstitution by admission. In academic accounting, change in profit sharing ratio can be presented in various ways. The existing partners may decide to change their profit sharing ratio for various reasons. When the profit sharing ratio is revised among existing partners, there ought to be a partial sacrifice of profit share by some partners in favour of others. The sacrifice of one or a group of partners becomes the gain of the remaining partners. Following is the formula for calculating sacrificing ratio:

Sacrificing ratio = Old ratio – new ratio

Gaining/sacrificing ratio

In case of revaluation, the depreciation is calculated on the total revalued amount over a period of balance useful lives assessed on the date of revaluation. New cost for the purpose of depreciation will be gross cost less accumulated depreciation on the date of revaluation. Along with this, the revaluation reserve is amortised to the income statement based on the useful life of the asset to which it relates. This is done to ensure that depreciation on the revalued amounts shouldn’t inflate/deflate the income statement.

A joint venture (JV) is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets.

Profit on venture can be ascertained with the help of the joint venture account.

For rectification we have to debit Ramesh (for making him debtor again) and to credit sales return as it was wrongly debited.