9% Debentures of Rs. 100 each are issued at 5% discount and redeemable at 8% premium, which of the following account will be credited, at the time of issue?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Premium on redemption of debenture account
When debentures are issued at a discount and redeemable at a premium, the company receives less now and owes more later, and both gaps are recorded on the day of issue. For each Rs. 100 debenture:
Cash received = Rs. 100 − Rs. 5 = Rs. 95
Loss on Issue of Debentures A/c = Rs. 5 (discount) + Rs. 8 (premium on redemption) = Rs. 13, debited
9% Debentures A/c = Rs. 100, credited
Premium on Redemption of Debentures A/c = Rs. 8, credited, as a liability to be paid at redemption
Discount and loss on issue are debits, and there is no premium on issue here, so Securities Premium is not touched.
NCERT (2026-27 edition):
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