Question

When debentures are issued at par and are redeemable at a premium, the loss on such an issues debited to ______.

Options

• Statement of profit and loss

• Debentures applications and allotment account

• Loss on issue of debentures account

Answer 1

When debentures are issued at par and are redeemable at a premium, the loss on such an issues debited to loss on issue of debentures account.

Explanation:

When debentures are redeemable at a premium, the amount must be debited to the ‘Loss on Issue of Debentures A/c’ account at the time of issue. The amount of the discount issuance is removed from the ‘Loss on Issue of Debentures’ account when debentures are issued at a discount and redeemable at a premium. When debentures are issued at a discount and redeemed at par, the amount deducted is to ‘Discount on Issue of Debentures A/c’ as is customary.