Advanced financial accounting - Lecture 24: Limited companies. The main topics covered in this chapter include: basic scenario; issued debenture on opening date Rs; issued debenture on mid of the year; redemption of debenture on opening date; income tax;... Please refer to the lecture for details!
Advanced Financial Accounting FIN-611 Mian Ahmad Farhan Lecture-24 Limited Companies Basic Scenario 5% Debenture Opening balance Issued during the year Closing balance Amount 25,000 20,000 45,000 Scenario-1 Issued debenture on opening date Rs 45,000 Interest on debenture = 45,000 x 5% = 2,250 Scenario-2 Issued debenture on mid of the year Interest on debenture = 25,000 x 5% = 1,250 = 20,000 x 5% x 6/12 = 500 1,750 Basic Scenario 5% Debenture Opening balance Redemption Closing balance Amount 25,000 (15,000) 10,000 Scenario-3 Redemption of debenture on opening date Interest on debenture = 10,000 x 5% = 500 Scenario-4 Redemption of debenture on mid of the year Interest on debenture = 10,000 x 5% = 500 = 15,000 x 5% x 6/12 = 375 875 Scenario-5 Redemption of debenture on closing date Interest on debenture = 25,000 x 5% = 1,250 Income Tax Journal Entries Interest expense paid Interest Exp A/c xxx Bank A/c xxx Interest payable Interest Exp A/c xxx Interest payable A/c xxx Income Tax Expense Current Tax Deferred Tax Current Tax Tax on current year’s tax profit Based on estimates Deferred Tax To create deferred tax liability Deferred tax Exp A/c xxx Deferred tax liability A/c xxx Increase in deferred tax liability Deferred tax Exp A/c xxx Deferred tax liability A/c xxx Decrease in deferred tax liability Deferred tax liability A/c xxx Deferred tax Exp A/c xxx Income Tax Expense in Income Statement Current Tax Provision of tax current year xxx Add under provision OR Less over provision xxx (xxx) xxx Deferred tax Add increase in deferred tax liability OR Less increase in deferred tax liability Expense for the year xxx xxx Balance sheet Current liability Provision for tax current year Non current liability Deferred tax liability ... Closing balance Amount 25,000 20,000 45,000 Scenario-1 Issued debenture on opening date Rs 45,000 Interest on debenture = 45,000 x 5% = 2,250 Scenario-2 Issued debenture on mid of the year Interest... Closing balance Amount 25,000 (15,000) 10,000 Scenario-3 Redemption of debenture on opening date Interest on debenture = 10,000 x 5% = 500 Scenario-4 Redemption of debenture on mid of the year Interest... mid of the year Interest on debenture = 10,000 x 5% = 500 = 15,000 x 5% x 6/12 = 375 875 Scenario-5 Redemption of debenture on closing date Interest on debenture = 25,000 x 5% = 1,250 Income Tax