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Issue of Debentures at Premium and Redeemable at Par

In this case, the issue price will be more than face value and the redemption value is equal to face value.
 

The premium on issue is credited to a separate account called ‘securities premium account’ which appears on the liabilities side of balance sheet under the head ‘Reserves and Surplus’.
 

All entries are the same except for entry number 3 which is as follows:
 


Issue of Debentures at Discount and Redeemable at Par

In this case, the issue price is less than the face value whereas redemption value is at face value.
 

Discount on issue is loss and is debited to a separate account called ‘Discount on issue of ...% Debentures A/c’ which is shown on the assets side under the head ‘Miscellaneous expenditure’.
 

All entries are same except for entry number 3 which is as follows:
 


Issue of Debentures at Par and Redeemable at Premium

In this case, the issue price is equal to face value and the redemption price is more than the face value.
 

The premium payable at the time of redemption is loss debited to ‘Loss on Issue of Debentures A/c’, which is a nominal account.

Such loss should be written off as far as possible to the securities premium account or profit and loss account before the redemption of debentures.
 

The unwritten off balance of such an account will appear on the assets side of the balance sheet under the head ‘Miscellaneous expenditure’.
 

The amount of premium payable on redemption is credited to a separate account called ‘Debenture Redemption Premium A/c’, which is a personal account representing the liability of the company.
 

This account will continue to appear on the liabilities side of the balance sheet under the head ‘Secured Loans’ along with the debentures account until the debentures are redeemed.
 

All entries are same except for entry number 3 which is as follows:
 


Issue of Debentures at Discount and Redeemable at Premium

In this case, the issue price is less than face value and redemption value is more than face value.
 

Therefore, the total loss on issue and redemption is debited to loss on issue of debentures and the entries will be as follows:
 


Issue of Debentures at Premium and Redeemable at Premium

In this case, the issue price as well as the redemption price are more than the face value.
 

All entries are the same except for entry number 3 which is as follows:
 






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