When debentures are issued at par and are redeemable at a premium, th…

The correct answer is Option (3) → Loss on issue of debentures account

When debentures are issued at par but are to be repaid at a premium, the company receives the face value now and must pay more later. The premium payable on redemption is a loss arising on the issue itself, so it is debited to Loss on Issue of Debentures Account at the time of issue, and the premium is credited to Premium on Redemption of Debentures Account, a liability. The loss is written off later.

Note: The answer key printed in the NCERT (2026-27) book gives 5 (b) for this question (Debentures applications and allotment account). That is a misprint in the book’s key: the book’s own rule, shown below, debits the premium on redemption to Loss on Issue of Debentures Account, which is option (c) in the book and Option (3) here.