When debentures are issued at premium and redeemed at premium, the journal entry will have the following combination-
(A) Discount on issue of debentures account is credited
(B) Loss on issue of debentures account is debited
(C) Security premium account is credited
(D) Premium on redemption of debentures account is credited
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (B), (C), and (D) only
Issue at a premium and redemption at a premium give the entry:
Debenture Application & Allotment A/c Dr.
Loss on Issue of Debentures A/c Dr. (premium on redemption)
To Debentures A/c (nominal value)
To Securities Premium A/c (premium on issue)
To Premium on Redemption of Debentures A/c (premium on redemption)
(A) Discount on issue of debentures account is credited Incorrect. There is no discount when debentures are issued at a premium; and a discount, when there is one, is debited, never credited.
(B) Loss on issue of debentures account is debited Correct. The premium payable on redemption is a loss to the company, recorded at the time of issue.
(C) Security premium account is credited Correct. The premium received on issue is a gain credited to Securities Premium.
(D) Premium on redemption of debentures account is credited Correct. The premium payable later is a liability, so this account is credited until the debentures are redeemed.
NCERT (2026-27 edition):
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