Question:medium

When debentures are issued at premium and redeemed at premium, the journal entry will have the following combination:
(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

Updated On: Mar 26, 2026
  • (A), (B), and (D) only
  • (A), (B), and (C) only
  • (B), (C), and (D) only
  • (A), (B), (C), and (D)
Show Solution

The Correct Option is C

Solution and Explanation

The journal entry process for issuing debentures at a premium and redeeming them at a premium impacts specific accounts. The following accounts are debited or credited:

(B) Loss on issue of debentures account is debited: This account records the expenses or losses incurred during the issuance of debentures at a premium. Losses result in debit entries.

(C) Security premium account is credited: The excess amount received over the face value upon issuing debentures at a premium is credited to the security premium account. This premium is considered income or an additional inflow for the issuer.

(D) Premium on redemption of debentures account is credited: When debentures are redeemed at a premium, the issuer recognizes a premium liability, which is reflected as a credit in this account, indicating an outflow or future obligation.

Therefore, the accurate combination is: (B), (C), and (D) only.

Was this answer helpful?
0