Question

When debentures are issued at par and are redeemable at a premium, the loss on such an issue is debited to:

• A. Profit & Loss Statement
• B. Debenture Application & Allotment A/c
• C. Loss on Issue of Debenture A/c
• D. Premium on Redemption A/c

Hint:

Remember: Any loss from discount or redemption premium is recorded in the “Loss on Issue of Debenture A/c”.

Answer 1

The Correct Option is C

Step 1: Case of issue at par with redemption at premium.
- Issue at par means company receives full face value of debenture.
- Redemption at premium means company must pay extra (premium) over face value at redemption.
Step 2: Accounting of premium.
The extra premium payable is a loss to the company, but it is not debited directly to P& L.
Step 3: Use of “Loss on Issue of Debentures A/c”.
This account is used to accumulate losses arising from discounts or redemption premiums. Premium payable on redemption is transferred here.
Step 4: Conclude.
Thus, the loss is debited to “Loss on Issue of Debenture A/c”.
Final Answer: \[ \boxed{\text{Loss on Issue of Debenture A/c}} \]