CUET Accountancy 2024
Accountancy
Issue and Redemption of Debentures
Medium
(A) Discount on issue of debentures account is credited (B) Loss on issue of debentures account is debited (C) Security premium account is credited (D) Premium on redemption of debentures account is credited
When debentures are issued at premium and redeemed at premium, the journal entry will have the following combination:
When debentures are issued at premium and redeemed at premium, the journal entry will have the following combination:
Correct Option: 4
When debentures are issued at a premium, it means they are sold for more than their face value. This creates a premium on issue, which is recorded in the accounts.When these debentures are redeemed at a premium, the company pays more than the face value again. This creates a premium on redemption.In the journal entries:- Loss on issue of debentures is debited because the company incurs a loss when they issue them at a premium. - Premium on redemption of debentures is credited because the company recognizes the premium they pay when redeeming.Options (A) and (C) are not relevant here because they deal with discounts and security premiums, which do not apply when both issuing and redeeming at a premium.Thus, the correct combination is (B), (C), and (D), leading to option 4 being correct.
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CUET Accountancy 2024