Accountancy Part AIssue and Redemption of Debentures

A company issues 1000 9% debentures of ₹100 each at a premium of 5% a…

A company issues 1000 9% debentures of ₹100 each at a premium of 5% and redeemable at a premium of 10%. The amount of loss on issue of debentures account will be:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → ₹10,000

The premium payable on redemption is a capital loss recognised at the time of issue and debited to Loss on Issue of Debentures Account. The premium received on issue is credited to Securities Premium Reserve and is not set off against it.

Premium on redemption = 1,000 × 100 × 10% = Rs. 10,000
Premium on issue = 1,000 × 100 × 5% = Rs. 5,000, credited to Securities Premium Reserve

NCERT (2026-27 edition):
Terms of Issue of Debentures

Extract from the NCERT textbook

NCERT (2026-27 edition):
Terms of Issue of Debentures – “… Notes: 1. When debentures are redeemable at a premium, the premium payable on redemption is debited to ‘Loss on Issue of Debentures A/c’.”