The following journal entry appears in the books of X Co. Ltd. Bank A/c Dr. 4,75,000 Loss on issue of debenture A/c Dr. 75,000 To 12% Debentures A/c…

Looking at the journal entry:

Cash received (Bank A/c): ₹4,75,000
Face Value of Debentures (12% Debentures A/c): ₹5,00,000

The difference between face value and cash received gives us the discount on issue.

Discount on Issue = Face Value - Cash Received
Discount on Issue = ₹5,00,000 - ₹4,75,000 = ₹25,000

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To verify this, the Loss on Issue of Debentures account includes:

• Discount on Issue
• Premium on Redemption

Loss on Issue = Discount on Issue + Premium on Redemption
₹75,000 = Discount on Issue + ₹50,000
Discount on Issue = ₹25,000 ✓

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Discount Percentage = $\frac{\text{Discount on Issue}}{\text{Face Value}} \times 100$Face ValueDiscount on Issue​×100

Discount Percentage = $\frac{25,000}{5,00,000} \times 100$5,00,00025,000​×100 = 5%

The debentures have been issued at a discount of 5%.