When debentures are issued at par and redeemable at a premium, the premium payable on redemption is debited to: Option 1: Statement of profit and loss Option 2: Debentures applications and allotment account Option 3: Loss on issue of debentures account Option 4: Capital Account

Answer: Loss on issue of debentures account. Solution: When debentures are issued at par but are redeemable at a premium, the company receives the face value at issue but must pay back face value plus premium at redemption. This difference represents a loss to the company. Example: If ₹100 debentures are issued at par (₹100) but redeemable at ₹110, the company receives ₹100 but must pay ₹110 at redemption - a loss of ₹10. At the time of issue, the journal entry is:, Account, Debit (₹), Credit (₹), Bank A/c, 100, Loss on Issue of Debentures A/c, 10, To Debentures A/c, 100, To Premium on Redemption of Debentures A/c, 10, The premium payable on redemption is credited to Premium on Redemption of Debentures Account (as it's a liability), and the corresponding debit goes to Loss on Issue of Debentures Account (as it's a capital loss). This loss is then written off over the life of the debentures by debiting Statement of Profit and Loss periodically. The correct option is Loss on issue of debentures account because the premium payable represents an additional burden on the company, creating a loss at the time of issue itself.

Company Accounts

Debentures

Easy

When debentures are issued at par and redeemable at a premium, the premium payable on redemption is debited to:

Statement of profit and loss

Debentures applications and allotment account

Loss on issue of debentures account

Capital Account

✅ Correct Option: 3

When debentures are issued at par but are redeemable at a premium, the company receives the face value at issue but must pay back face value plus premium at redemption. This difference represents a loss to the company.

Example: If ₹100 debentures are issued at par (₹100) but redeemable at ₹110, the company receives ₹100 but must pay ₹110 at redemption - a loss of ₹10.

At the time of issue, the journal entry is:

Account	Debit (₹)	Credit (₹)
Bank A/c	100
Loss on Issue of Debentures A/c	10
To Debentures A/c		100
To Premium on Redemption of Debentures A/c		10

The premium payable on redemption is credited to Premium on Redemption of Debentures Account (as it's a liability), and the corresponding debit goes to Loss on Issue of Debentures Account (as it's a capital loss).

This loss is then written off over the life of the debentures by debiting Statement of Profit and Loss periodically.

The correct option is Loss on issue of debentures account because the premium payable represents an additional burden on the company, creating a loss at the time of issue itself.

2026: 13 May Shift 2

When debentures are issued at discount and redeemable at a premium, ___________ account will be _________ for combined capital loss of issue and redemption of debentures.

2025: 30 May Shift 2

Perpetual Debentures are also known as:-

2026: 29 May Shift 1

Interest on debenture is a ............ against the profit of the company and must be paid whether the company has earned any profit or not.

2026: 6 June Shift 1

Varun Ltd., purchased building worth Rs.1,50,000, machinery worth Rs.1,40,000 and furniture worth Rs.10,000 from Anuj Ltd., and took over its liabilities of Rs. 20,000 for a purchase consideration of Rs. 3,15,000. Varun Ltd., paid the purchase consideration by issuing 12% debentures of Rs.100 each at a premium of 5%. What will be the amount of goodwill in this case?

2025: 15 May Shift 1

The following journal entry appears in the books of X Co. Ltd.

Bank A/c Dr. 4,75,000

Loss on issue of debenture A/c Dr. 75,000

To 12% Debentures A/c 5,00,000

To Premium on Redemption of Debenture A/c 50,000

In this case the debentures have been issued at a discount of 5% . What is the rate of premium on redemption of debentures?

2023: 28 May Shift 1

If 5% debenture of Rs. 8,00,000 of Rs. 100 were issued at 15% premium. Amount is payable as Rs. 25 on applications, Rs. 50 on allotment and Rs. 40 on 1st and final call. How much amount should be credited to "Security Premium Reserve A/c".

When debentures are issued at par and redeemable at a premium, the premium payable on redemption is debited to:

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