Redemption of debentures

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Savithry

Student

65 Points Posted on 21 August 2019

Timex Ltd issued 1000 8% debentures of RS 100 each.give appropriate journal entries..

1) Issued at a discount of 5% ,repayable at a premium of 10%

Journal entry

Bank a/c dr 95000 Dis on issue of debentures a/c Dr 5000 Loss on issue of debentures a/c dr 10000 To 8% debentures a/c Dr 100000 To premium on redemption of debentures a/c dr 10000

Can anyone please explain me why loss on issue of debentures should be debited and premium on redemption should be credited ???

Replies (2)

yasaswi gomes

My grammar is 💯 good I

7301 Points Posted on 05 July 2020

According to nominal accounts: debit all expenses and losses, credit all incomes and gains.

Then when it comes to securities premium account is a:

Premium on redemption is personal account

Premium on issue of debentures is capital profits transferred to reserves.

https://educoop.com/questions/d2l1.H T M L

https://www.yourarticlelibrary.com/accounting/debentures/issue-of-debenture-at-par-premium-and-discount/46934

Since reserves are a credit, when you receive premium it is credited and when you pay premium, you debit that account. I am sorry, there is not enough info on premium account classification as personal or real account. But all Equity and capital related to shareholders is personal account while, all balance sheet items are real accounts,