Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Issue and Redemption of Debentures

Question:

Where is the amount of premium received on the issuance of debentures typically credited?

Options:

Profit and Loss Account

Capital Reserve Account

Securities Premium Reserve Account

Debenture Redemption Reserve Account

Correct Answer:

Securities Premium Reserve Account

Explanation:

When a company issues debentures at a premium, the amount received as the premium is typically credited to the "Securities Premium Reserve Account." This accounting treatment ensures that the excess amount received over the nominal value of the debentures is properly accounted for and reflects the company's financial position accurately.