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Apr 21, 2016 at 07:29 AM

Splitting of Investment in Bonds entries for Face value and premium value

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Dear Friends,

We have a requirement in unit quoted Bonds - 04K where the accounting entries has to be split for the face value investment and premium amount investment when the bonds are purchased from secondary market.

I will give one example:-

1)

Nominal value of bond - 100

Market value - 101 (premium of 1)

Number of units - 3000

Ideally, The entry on investment is as follows:-

Investment Account Dr. 303000

Bank Account Cr. 303000

(I am not showing here the accrued interest entry)

But the requirement is that , they want the entries to be split for the nominal value and for premium value

Investment Account Dr. 300000

Premium on investment Ac Dr. 3000

Bank Account Cr 303000

Same things goes when the bonds are purchased at DISCOUNT.

2)

Once this is done, they want to WRITE OFF this premium/discount amount over the period of 10 years.

Accounting entry for that is:-

Revenue/Income & Expenditure Ac Dr.

Premium on Investment Ac Cr.

The amount of premium is amortized over the remaining duration of bond

How can we achieve this requirement?

Regards,

Rohan