Question

Prepare ‘Loss on Issue of Debentures Account’ for the year ended 31\textsuperscript{st March, 2023.}

Hint:

The "Loss on Issue of Debentures" account ensures transparency in financial reporting by adjusting for liabilities arising from premium redemption of debentures.

Answer 1

1. Explanation of the Account: - The "Loss on Issue of Debentures" account reflects the adjustment of the redemption premium over the premium on issue. - This account is created upon the issue of debentures and is adjusted or written off over time. If sufficient reserves are available, the entire amount may be written off in the same year. 2. Entries to Prepare the Account: - The account is first debited with the total loss on issue, which equals the redemption premium not covered by the premium on issue. - It is then credited when the loss is written off using the Securities Premium Account or other reserves. Loss on Issue of Debentures Account: \begin{center} \begin{tabular}{|l|c|c|} \hline Particulars & Dr Amount (₹) & Cr Amount (₹)
\hline Premium on Redemption of Debentures A/c Dr & 2,50,000 &
To Loss on Issue of Debentures A/c & & 2,50,000
\hline Securities Premium A/c Dr & 2,50,000 &
To Loss on Issue of Debentures A/c & & 2,50,000
\hline \end{tabular} \end{center} 3. Conclusion: - The balance in the "Loss on Issue of Debentures" account at the end of the year is \( ₹ 0 \), as it has been fully written off using the Securities Premium Account. - If the Securities Premium Account had been insufficient, the remaining balance would have been carried forward or charged to the Profit and Loss Account over subsequent years.