CA Foundation · Accounting · Company Accounts
Verma Ltd. issued 1,000 debentures of ₹100 each at par, redeemable at a premium of 10%. The journal entry on issue will include a debit to Loss on Issue of Debentures of:
The loss on issue of debentures is ₹10,000. Debentures of ₹1,00,000 face value are redeemable at 10% premium, so the company must pay an extra ₹10,000 at redemption. This is recorded at issue by debiting Loss on Issue of Debentures and crediting Premium on Redemption of Debentures.
- A₹10,000Correct
- B₹1,10,000
- C₹1,00,000
- DNil, as debentures were issued at par
Explanation
Face value is ₹1,00,000. Redemption premium of 10% gives ₹10,000, which is payable on redemption though not received at issue. Hence Loss on Issue of Debentures of ₹10,000 is debited and the Premium on Redemption of Debentures is credited as a liability. 'Nil' ignores the redemption premium.
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