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 redeemable at a premium, Loss on Issue of Debentures Account is debited with both the discount on issue and the premium payable on redemption.
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 = Rs. 15,000 + Rs. 5,000 = Rs. 20,000
Rs. 15,000 is the discount alone; it leaves out the premium on redemption, which is also a loss to be provided for at the time of issue.
NCERT (2026-27 edition):
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