Question : On 1st April, 2019, Moonlight Ltd. issued 1,000, 9% Debentures of Rs. 200 each at a discount of 5% redeemable after 5 years at a premium of 10%. All the debentures were subscribed and allotment was made. The balance in Securities Premium Reserve is Rs. 10,000.
At the time of writing off the loss on issue of debentures statement of profit and loss account will be debited/credited with ____________.
Option 1: Credited with Rs. 20,000
Option 2: Debited with Rs. 30,000
Option 3: Debited with Rs. 20,000
Option 4: Credited with Rs. 30,000
Correct Answer: Debited with Rs. 20,000
Solution : Answer = Debited with Rs. 20,000
Loss on issue of debentures Rs. 2,00,000 X 5% = Rs.10,000 + Rs. 2,00,000 X 10% = Rs. 20,000
Loss on issue of debentures = Rs. 30,000
Written off from securities premium = Rs. 10,000
From profit and loss Account = Rs. 20,000
Securities premium A/c Dr 10,000
Profit and loss account Dr 20,000
To loss on issue of Debentures A/c 30,000
Hence, the correct option is 3.
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