Question : Which of the following statements is incorrect?
Option 1: Premium on Issue of Debentures is a capital profit
Option 2: Premium on Issue of debentures are shown on the Equity and Liabilities side under the head ‘Reserves and Surplus’
Option 3: It is a liability and appears under the head “Non-Current Liabilities” under sub-head ‘Other Long term Liabilities’ till the redemption
Option 4: All of the above
Correct Answer: Premium on Issue of Debentures is a capital profit
Solution : Answer = Premium on Issue of Debentures is a capital profit
Premium on redemption of debentures is not a capital nature profit. Premium on Issue of Debentures is not a capital profit but rather a liability for the company. It is shown on the Equity and Liabilities side under the head ‘Reserves and Surplus’ until the debentures are redeemed. Hence, the correct option is 1.
Question : Which of the following statements is false?
Question : The Company will pay a premium at the time of their redemption. Although such premium will be paid at the time of actual redemption, as it is a known ------- the Company records such loss at the time of issue by -------- an account called, ------------------------.
Question : If debentures of Rs. 20,000 are issued at par and are redeemable at a premium of 10%, the premium payable is debited to
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