Fincnicial Accounting

Class : B.Com 1 year (Plain)
Subject : Fincnicial Accounting
Faculty's name : Dr. Asmita Jain
Topic : Cum interest and ex interest purchase and sale

1. Meaning of Interest on Debentures
• Interest on debentures is calculated on the face value of debentures.
• It is usually paid half-yearly or annually.
• When debentures are bought or sold between two interest dates, the buyer pays the seller the interest for the period already elapsed.
2. Cum-Interest Purchase / Sale
Meaning
• Cum-interest means price includes interest.
• The quoted price of debentures includes:
• Capital value of debentures
• Accrued interest up to the date of purchase/sale
👉 "Cum" means "including"
Calculation of Interest
Interest=Face Value×Rate×Period/12
Treatment in Books
• Total amount paid/received includes interest
• Interest portion is separated
• Capital portion is taken as cost of investment
Example (Cum-Interest)
A purchased ₹10,000, 12% debentures on 1 July at ₹10,600 cum-interest.
Interest is payable on 31 December.
Interest for 6 months:
10,000×12%×6/ 12 = ₹600
Cost of Investment:
10,600−600=₹10,000

3. Ex-Interest Purchase / Sale
Meaning
• Ex-interest means price excludes interest
• Interest is paid separately by buyer to seller
👉 "Ex" means "excluding"
Treatment in Books
• Quoted price = only capital value
• Interest is calculated separately
• Interest is transferred to Interest Account
Example (Ex-Interest)
A purchased ₹10,000, 12% debentures at ₹10,000 ex-interest on 1 July.
Interest for 6 months:
10,000×12%×6/ 12= ₹600
Total Payment:
10,000+600=₹10,600

4. Sale of Debentures (Cum & Ex)
Cum-Interest Sale
• Sale price includes interest
• Interest part is credited to Interest Account
• Remaining amount is sale value of investment
Ex-Interest Sale
• Sale price excludes interest
• Interest is received separately
• Interest credited to Interest Account