ABC Industries Ltd, issued 2,000, 10% Debentures of Rs. 100 each, at a premium of Rs. 10 per debenture payable as follows: On application Rs. 50; On allotment Rs. 60. The debentures were fully subscribed, and all money was duly received. The amount of long-term borrowings on the balance sheet will be:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → 2,00,000
Debentures are shown under Non-current Liabilities → Long-term borrowings at their face value, because that is the amount the company owes the debentureholders. The premium is not a debt; it goes to Securities Premium under Reserves and Surplus.
Debentures issued = 2,000 of Rs. 100 each
Long-term borrowings = 2,000 × Rs. 100 = Rs. 2,00,000
Securities Premium = 2,000 × Rs. 10 = Rs. 20,000 (Reserves and Surplus)
Cash received = 2,000 × Rs. 110 = Rs. 2,20,000
Rs. 2,20,000 is the cash collected, not the borrowing; adding the premium to the debentures is the usual slip here.
NCERT (2026-27 edition):
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