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CS Executive · Corporate Accounting and Financial Management · Accounting for Debentures

Mehta Ltd issues 5,000 debentures of Rs 100 each at Rs 96, redeemable at a premium of 5%. Securities premium account has sufficient balance. What is the amount debited to Loss on Issue of Debentures at issue?

The loss on issue is Rs 45,000. Each debenture is issued at Rs 96 but redeemed at Rs 105, a Rs 9 loss, and 5,000 debentures give Rs 45,000. This combines the Rs 4 discount and the Rs 5 redemption premium.

  1. ARs 20,000
  2. BRs 25,000
  3. CRs 45,000Correct
  4. DRs 5,000

Explanation

Redemption value is Rs 105, issue price Rs 96, so loss per debenture is Rs 9. Total = 5,000 x 9 = Rs 45,000. Rs 20,000 counts only the discount; Rs 25,000 counts only the redemption premium.

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