Company issues 10,000, 12% debentures of ₹100 each at par, redeemable at premium of 5% after 5 years. At the time of allotment: journal Entry will be:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Debenture Application and Allotment A/c Dr. ₹10,00,000 Loss of Issue of Debenture Dr. ₹50,000 To 12% Debenture A/c ₹10,00,000 To premium on Redemption of Debentures A/c ₹50,000
The debentures are issued at par and redeemable at a premium. On allotment the application money is transferred to the Debentures Account at nominal value, and the premium payable on redemption is recorded now as a liability, debited to Loss on Issue of Debentures A/c.
Nominal value = 10,000 × ₹100 = ₹10,00,000
Premium on redemption = 5% of ₹10,00,000 = ₹50,000
Debenture Application and Allotment A/c Dr. ₹10,00,000
Loss on Issue of Debentures A/c Dr. ₹50,000
To 12% Debentures A/c ₹10,00,000
To Premium on Redemption of Debentures A/c ₹50,000
The bank receives only the issue price of ₹10,00,000; the premium is paid only at redemption after 5 years.
NCERT (2026-27 edition):
NCERT (2026-27 edition):
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