Question

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

• A. Statement of Profit \& Loss A/c
• B. Loss on issue of Debentures A/c
• C. Debentures Application \& Allotment A/c
• D. Profit on Issue of Debentures A/c

Hint:

Always debit "Loss on issue of Debentures A/c" when debentures are issued at par but redeemable at premium — it’s a capital loss.

Answer 1

The Correct Option is B

Step 1: Understand the scenario.
When debentures are issued at par (face value = issue price), but redeemable at a premium, the company incurs a loss because it will pay more at redemption. This future loss is accounted for at the time of issue. Step 2: Treatment of loss.
This type of loss is recorded under the account "Loss on issue of Debentures A/c" and is shown as a fictitious asset in the balance sheet, to be written off over the years.