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CA Foundation · Accounting · Company Accounts

Sharma Ltd. issued 2,000 10% debentures of ₹100 each at a discount of 5%, redeemable at par after five years. At the time of issue, the amount debited to 'Loss on Issue of Debentures' account is:

The loss on issue of debentures is ₹10,000. The face value is ₹2,00,000 and the discount of 5% on it equals ₹10,000. Because redemption is at par, this discount is treated as a loss on issue and debited at the time of issue.

  1. A₹10,000Correct
  2. B₹20,000
  3. C₹5,000
  4. D₹2,00,000

Explanation

Face value = 2,000 × ₹100 = ₹2,00,000. Discount at 5% = ₹10,000. Since the debentures are redeemable at par, the discount is a loss on issue, debited as ₹10,000. Option ₹20,000 wrongly uses a 10% rate (the interest rate), and ₹5,000 uses 5% of a wrong base.

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