Accountancy Part AIssue and Redemption of Debentures

The amount of discount on issue of debentures:

Read the following information and answer the questions:

On 1^st April 2013, a company made an issue of 10,000, 9% debentures of ₹100 each at ₹92 per debenture. The terms of issue provided for redemption of 2,000 debentures every year starting from 31^st March 2016, either by conversion into equity shares of ₹20 each or by draw of lot at par at the company's option. On 31^st March 2016, the company redeemed 2,000, 9% debentures by converting them into equity shares of ₹20 each.

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → ₹80,000

A debenture issued below its face value is issued at a discount.

Discount per debenture = ₹100 − ₹92 = ₹8

Discount on 10,000 debentures = 10,000 × ₹8

= ₹80,000

NCERT (2026-27 edition):
Issue of Debentures at a Discount – “When a debenture is issued at a price below its nominal value, it is said to be issued at a discount. For example, the issue of Rs. 100 debentures at Rs. 95, Rs. 5 being the amount of discount.”