Debenture Interest question? (Student) Help :(

[idealines]

I was given this question in one of my seminars and I'm completely stuck on it, any ideas how I would go about accounting it?

Debenture interest is payable in arrears on 1 January and 1 July. The loan was taken out on 1 April 20X5 and the credit balance in the ledger accounts relates to the accrual as at the end of the previous year which has yet to be reversed. No accrual has been made for the interest for the second half of the year. Interest for the year of £86,000 on the overdraft facility is included within administrative expenses.

 

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For a starter you never mentioned which year your are in the current books, Nonetheless if the loan was taken out in April 2005 which makes it one year interval. Depending on the previous year end you could either attribute 21500 to 1st July 2005; and 43000 to 1st of January 2006. I would not like to make any assumption on the year end so another 43000 to 1st of July 2006. I think it simply analogy, except the fiscal year match with that of the financial statement which is 1st April 2006 then we simply attribute 21500 to 1st April 2006 instead of 1st of July 2006,

They are all credit entries in "Debenture interest ledger" and a debit in "Debenture ledger". Once they are paid then you make credit payment in the "cashbook", a debit entry in "Debentures interest ledger". The Principal remains a credit entry in the Debenture ledger account.

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