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
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 ✓
Discount Percentage = Face ValueDiscount on Issue×100
Discount Percentage = 5,00,00025,000×100 = 5%
The debentures have been issued at a discount of 5%.