— Kishore V, SME and ACW at Edumarz
Debentures redeemed at a premium are those that are redeemed for a price higher than their par value or nominal value.
A capital loss is a difference between the par value (face value) and the price at which it is redeemed, and it is written off until the debentures are redeemed.
Until the debentures are redeemed, it is displayed on the liabilities section of the balance sheet.
The accounting treatment looks like this:
At the time of the Debenture Issue
Particulars Bank/Debenture Allotment A/c Dr Loss on Issue of Debenture A/c Dr To Debentures A/c | L.F | Debit | Credit |
To Premium on Debenture A/c Redemption (Debentures are issued with a redeemable at premium term)
For the Loss It was written off.
Particulars Profit and Loss A/c Dr To Loss on Issue of Debenture A/c (Loss on issued of debenture written off) | L.F | Debit | Credit |
At the time of Redemption of Debentures
Particulars Debentures A/c Dr Premium on Redemption A/c Dr To Debentures Holders A/c (Amount of debenture due to debenture holders)
| L.F | Debit | Credit |