Accountancy Part AIssue and Redemption of Debentures

Issue of Rs. 1,00,000, 9% debentures of Rs. 100 each at discount of 1…

Issue of Rs. 1,00,000, 9% debentures of Rs. 100 each at discount of 15% but redeemable at premium of 5%. the amount debited to loss on issue of debenture account is.

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → Rs. 20,000.

When debentures are issued at a discount and are redeemable at a premium, both the discount allowed now and the premium payable later are losses on the issue, and both are debited to the Loss on Issue of Debentures Account.

Discount on issue = 15% of Rs. 1,00,000 = Rs. 15,000
Premium on redemption = 5% of Rs. 1,00,000 = Rs. 5,000
Loss on issue of debentures = 15,000 + 5,000 = Rs. 20,000

Rs. 15,000 is the discount alone; the premium payable on redemption is a loss too, because it is a liability created at the time of issue.

NCERT (2026-27 edition):
Terms of Issue of Debentures

Extract from the NCERT textbook

NCERT (2026-27 edition):
Terms of Issue of Debentures – “… Notes: 1. When debentures are redeemable at a premium, the premium payable on redemption is debited to ‘Loss on Issue of Debentures A/c’. It may be noted that when debentures are issued at a discount and are redeemable at a premium, the amount of discount on issue is also debited to ‘Loss on Issue of Debentures’. It may be noted that when the debentures are issued at a discount and are redeemable at par, the amount debited to ‘Discount on Issue of Debentures A/c’ as usual.”