Observe the below given Journal Entry:
Debenture Application & Allotment A/c Dr. 4,70,000
Loss on Issue of Debenture A/c Dr. 70,000
To 8 % Debenture A/c 5,00,000
To Premium on Redemption of Debenture A/c 40,000
Debentures are:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Issued at 6% Discount and Redeemable at 8% Premium.
Read the entry back. The credit to 8% Debentures A/c is the face value, the credit to Premium on Redemption is what will be paid extra later, and the debit to Application & Allotment is the cash actually received.
Face value = Rs. 5,00,000
Premium on redemption = Rs. 40,000 = 8% of Rs. 5,00,000, so redeemable at 8% premium
Cash received = Rs. 4,70,000 = 94% of Rs. 5,00,000, so issued at 6% discount
Discount = Rs. 5,00,000 − Rs. 4,70,000 = Rs. 30,000
Check: Loss on issue = Rs. 30,000 + Rs. 40,000 = Rs. 70,000, as in the entry
Note: NTA picked this question from an NCERT (2026-27) exercise and changed the figures. Do not ignore NCERT while practising numericals.
NCERT (2026-27 edition):
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