X Ltd issued Rs. 5,00,000, 9% debentures of Rs. 100 each at a premium of 5% and these debentures are redeemable at a premium of 5%. What amount should be debited to Loss on Issue of Debenture Account?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Rs. 25,000
When debentures are issued at a premium and are also redeemable at a premium, only the premium payable on redemption is a loss. It is a sum the company has promised to pay later, so it is debited to Loss on Issue of Debentures at the time of issue.
Nominal value = Rs. 5,00,000
Premium payable on redemption = 5% of Rs. 5,00,000 = Rs. 25,000, debited to Loss on Issue of Debentures
Premium received on issue = 5% of Rs. 5,00,000 = Rs. 25,000, credited to Securities Premium Reserve
The two premiums are equal here, but they are not set off against each other. The premium received is a capital gain kept in the Securities Premium Reserve; the premium payable is a liability recorded at issue. So the loss debited stays Rs. 25,000.
Note: NTA picked this question from an NCERT (2026-27) illustration and changed the figures. Do not ignore NCERT while practising numericals.
NCERT (2026-27 edition): NCERT (2026-27 edition):
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