Chapter 3
Accounting for debentures
NEB Class 12 past exam questions
Past questions and answers
6 questions set from this chapter, 2 of them more than once; 6 are most repeated (set, or a close variant set, in 3 or more exams). Most repeated first.
- Most repeated · 4 of 7 exams
- Asked 2 times
- 2083 Baishakh · 1+1+1 marks
- 2082 Baishakh · 5 marks
X company issued 7,000, 10% debentures of Rs. 100 each at 5% premium, redeemable at 10% premium after 5 years.
Required: Entries for issue and redemption of debentures.
Similar questions: b. A company issued 5,000, 8% debentures (2079 Jestha) · Debenture issue and redemption (2079 Model Set B) · A Co. Ltd. issued 8,000, 10% Debentures
Answer
Working notes
- Face value = 7,000 × Rs 100 = Rs 7,00,000; premium on issue (5%) = Rs 35,000; cash received = Rs 7,35,000.
- Premium payable on redemption (10%) = Rs 70,000. This is a loss, recorded when the debentures are issued; amount payable on redemption = Rs 7,70,000.
| Particulars | Dr (Rs) | Cr (Rs) |
|---|---|---|
| 1. Issue of debentures | ||
| Bank A/c Dr. | 7,35,000 | |
| Loss on Issue of Debentures A/c Dr. | 70,000 | |
| To 10% Debentures A/c | 7,00,000 | |
| To Securities Premium A/c | 35,000 | |
| To Premium on Redemption of Debentures A/c | 70,000 | |
| (Being 7,000 debentures issued at 5% premium, redeemable at 10% premium) | ||
| 2. Redemption after 5 years | ||
| 10% Debentures A/c Dr. | 7,00,000 | |
| Premium on Redemption of Debentures A/c Dr. | 70,000 | |
| To Debentureholders A/c | 7,70,000 | |
| (Being debentures due for redemption at 10% premium) | ||
| Debentureholders A/c Dr. | 7,70,000 | |
| To Bank A/c | 7,70,000 | |
| (Being amount paid to debentureholders) |
The loss on issue of Rs 70,000 is written off against Securities Premium or the Statement of Profit and Loss over the life of the debentures.
Answer checked by Claude Sonnet · Oct 21, 2026
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- Most repeated · 4 of 7 exams
- 2079 Jestha · 5 marks
b. A company issued 5,000, 8% debentures of Rs. 1,000 each at 10% premium and redeemable after 5 years at par.
Required: Journal Entries for issue and redemption of debenture.
Similar questions: X company issued 7,000, 10% debentures of (2083 Baishakh) · Debenture issue and redemption (2079 Model Set B) · A Co. Ltd. issued 8,000, 10% Debentures
Answer
Working Note:
- Issue price per debenture = Rs. 1,000 + 10% of Rs. 1,000 = Rs. 1,100
- Total issue proceeds = 5,000 × Rs. 1,100 = Rs. 55,00,000
- Nominal value of debentures = 5,000 × Rs. 1,000 = Rs. 50,00,000
- Securities premium = Rs. 55,00,000 − Rs. 50,00,000 = Rs. 5,00,000
- Redemption is at par, so redemption amount = Rs. 50,00,000
Journal Entries
| Date | Particulars | L.F. | Debit (Rs.) | Credit (Rs.) |
|---|---|---|---|---|
| Bank A/c | 55,00,000 | |||
| To 8% Debentures A/c | 50,00,000 | |||
| To Securities Premium A/c | 5,00,000 | |||
| (Being 5,000 8% debentures of Rs. 1,000 each issued at 10% premium) | ||||
| 8% Debentures A/c | 50,00,000 | |||
| To Debentureholders A/c | 50,00,000 | |||
| (Being amount due to debentureholders on redemption at par) | ||||
| Debentureholders A/c | 50,00,000 | |||
| To Bank A/c | 50,00,000 | |||
| (Being payment made to debentureholders on redemption) |
Note: Since the debentures are redeemable at par, there is no premium on redemption. Hence, no loss on issue of debentures arises.
Answer checked by Claude Sonnet · Oct 21, 2026
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- Most repeated · 4 of 7 exams
- 2079 Model Set B · 3 marks
P Company Ltd. issued 5,000, 9% debentures of Rs. 100 each at 10% discount and redeemable at 10% premium after 5 years.
Required: Journal entries for issue and redemption of debentures.
Similar questions: A Co. Ltd. issued 8,000, 10% Debentures · X company issued 7,000, 10% debentures of (2083 Baishakh) · b. A company issued 5,000, 8% debentures (2079 Jestha)
Answer
Working notes
- Face value = Rs 5,00,000.
- Cash received at 10% discount = Rs 4,50,000.
- Amount payable at redemption at 10% premium = Rs 5,50,000, so premium on redemption = Rs 50,000.
- Loss on issue of debentures = Rs 5,50,000 − Rs 4,50,000 = Rs 1,00,000 (discount Rs 50,000 + premium Rs 50,000).
| Particulars | Dr (Rs) | Cr (Rs) |
|---|---|---|
| Issue | ||
| Bank A/c Dr. | 4,50,000 | |
| Loss on Issue of Debentures A/c Dr. | 1,00,000 | |
| To 9% Debentures A/c | 5,00,000 | |
| To Premium on Redemption of Debentures A/c | 50,000 | |
| (Being 5,000 debentures issued at 10% discount, redeemable at 10% premium) | ||
| Redemption (after 5 years) | ||
| 9% Debentures A/c Dr. | 5,00,000 | |
| Premium on Redemption of Debentures A/c Dr. | 50,000 | |
| To Bank A/c | 5,50,000 | |
| (Being debentures redeemed at 10% premium) |
The loss on issue of Rs 1,00,000 is written off over the five years (Rs 20,000 a year) against profit.
Answer checked by Claude Sonnet · Oct 21, 2026
Test yourself · 2 MCQs
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- Most repeated · 4 of 7 exams
- NEB Class 12 2079 Accounting Model Question Set A · 3 marks
A Co. Ltd. issued 8,000, 10% Debentures of Rs. 1,000 each at a premium of 5% redeemable at a premium of 10% after 5 years.
Required:
Journal entries for issue and redemption of debentures [1.5+1.5=3]
Similar questions: Debenture issue and redemption (2079 Model Set B) · X company issued 7,000, 10% debentures of (2083 Baishakh) · b. A company issued 5,000, 8% debentures (2079 Jestha)
Answer
Working notes
- Face value of debentures = 8,000 × Rs 1,000 = Rs 80,00,000
- Premium on issue (5%) = 80,00,000 × 5% = Rs 4,00,000
- Premium on redemption (10%) = 80,00,000 × 10% = Rs 8,00,000
- Amount received on issue = 80,00,000 + 4,00,000 = Rs 84,00,000
- Amount payable on redemption = 80,00,000 + 8,00,000 = Rs 88,00,000
1. Journal entries for issue of debentures
| Particulars | L.F. | Debit (Rs) | Credit (Rs) |
|---|---|---|---|
| Bank A/c Dr. | 84,00,000 | ||
| Loss on Issue of Debentures A/c Dr. | 8,00,000 | ||
| To 10% Debentures A/c | 80,00,000 | ||
| To Securities Premium A/c | 4,00,000 | ||
| To Premium on Redemption of Debentures A/c | 8,00,000 | ||
| (Being 8,000 10% debentures of Rs 1,000 each issued at a premium of 5%, redeemable at a premium of 10%) |
(Alternative: the same may be passed as two entries — (i) Bank A/c Dr. 84,00,000; To 10% Debentures A/c 80,00,000; To Securities Premium A/c 4,00,000. (ii) Loss on Issue of Debentures A/c Dr. 8,00,000; To Premium on Redemption of Debentures A/c 8,00,000.)
2. Journal entries for redemption of debentures
| Particulars | L.F. | Debit (Rs) | Credit (Rs) |
|---|---|---|---|
| 10% Debentures A/c Dr. | 80,00,000 | ||
| Premium on Redemption of Debentures A/c Dr. | 8,00,000 | ||
| To Debentureholders A/c | 88,00,000 | ||
| (Being amount due to debentureholders on redemption at 10% premium) | |||
| Debentureholders A/c Dr. | 88,00,000 | ||
| To Bank A/c | 88,00,000 | ||
| (Being amount paid to debentureholders on redemption) |
Note: The loss on issue of debentures of Rs 8,00,000 is written off against Securities Premium or charged to the Statement of Profit and Loss. Since the debentures are to be redeemed after 5 years, the company must also create a Debenture Redemption Reserve (DRR) out of profits and invest in specified securities as required by law.
Answer checked by Claude Sonnet · Oct 21, 2026
Test yourself · 2 MCQs
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- Most repeated · 3 of 7 exams
- Asked 2 times
- 2082 Supplementary · 3 marks
- 2081 Baishakh · 2 marks
A Company Limited issued 5,000 Debentures @ Rs. 100 each at par. These Debentures were redeemed after 5 years at 5% premium.
Required: Entries for issue and redemption of Debentures.
Similar questions: A bank issued 5,000, 7% debentures of (2080 Baishakh)
Answer
Journal Entries
In the books of A Company Limited
1. On issue of debentures
| Date | Particulars | L.F. | Debit (Rs.) | Credit (Rs.) |
|---|---|---|---|---|
| Bank A/c ............................ Dr. | 5,00,000 | |||
| To 5,000 Debentures A/c | 5,00,000 | |||
| (Being 5,000 debentures of Rs. 100 each issued at par) |
2. On redemption of debentures at 5% premium
| Date | Particulars | L.F. | Debit (Rs.) | Credit (Rs.) |
|---|---|---|---|---|
| 5,000 Debentures A/c ............................ Dr. | 5,00,000 | |||
| Premium on Redemption of Debentures A/c ... Dr. | 25,000 | |||
| To Bank A/c | 5,25,000 | |||
| (Being debentures redeemed at 5% premium) |
3. On writing off premium on redemption
| Date | Particulars | L.F. | Debit (Rs.) | Credit (Rs.) |
|---|---|---|---|---|
| Securities Premium / Statement of P&L A/c ... Dr. | 25,000 | |||
| To Premium on Redemption of Debentures A/c | 25,000 | |||
| (Being premium on redemption written off) |
Working Note:
- Issue amount = 5,000 × Rs. 100 = Rs. 5,00,000
- Premium on redemption = 5% of Rs. 5,00,000 = Rs. 25,000
- Amount paid on redemption = 5,00,000 + 25,000 = Rs. 5,25,000
Answer checked by Claude Sonnet · Oct 21, 2026
Test yourself · 2 MCQs
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- Most repeated · 3 of 7 exams
- 2080 Baishakh · 2 marks
A bank issued 5,000, 7% debentures of Rs. 100 each at par. These debentures were redeemed after 5 years at 5% discount.
Required:
Entries for issue and redemption of debentures
Similar questions: A Company Limited issued 5,000 Debentures @ (2082 Supplementary)
Answer
Working notes
- Issue: 5,000 × Rs 100 = Rs 5,00,000 at par.
- Redemption at 5% discount: amount paid = Rs 5,00,000 × 95% = Rs 4,75,000; gain = Rs 25,000, which is a capital profit credited to Capital Reserve.
| Particulars | Dr (Rs) | Cr (Rs) |
|---|---|---|
| 1. Issue of debentures | ||
| Bank A/c Dr. | 5,00,000 | |
| To 7% Debentures A/c | 5,00,000 | |
| (Being 5,000 debentures of Rs 100 issued at par) | ||
| 2. Redemption after 5 years | ||
| 7% Debentures A/c Dr. | 5,00,000 | |
| To Debentureholders A/c | 4,75,000 | |
| To Capital Reserve A/c | 25,000 | |
| (Being debentures redeemed at 5% discount) | ||
| Debentureholders A/c Dr. | 4,75,000 | |
| To Bank A/c | 4,75,000 | |
| (Being amount paid to debentureholders) |
Answer checked by Claude Sonnet · Oct 21, 2026
Test yourself · 2 MCQs
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Questions from NEB Class 12 2083 Accounting (Board exam, Baishakh 2083), NEB Class 12 2082 Accounting (Board exam, Baishakh 2082), NEB Class 12 2082 Accounting Supplementary Set A (Grade-increment / supplementary exam, Set A), NEB Class 12 2081 Accounting (Board exam, Baishakh 2081), NEB Class 12 2080 Accounting (Board exam, Baishakh 2080), NEB Class 12 2079 Accounting (Board exam, Jestha 2079), NEB Class 12 2079 Accounting Model Question Set A (NEB model paper, Set A) and NEB Class 12 2079 (2023) Accounting 1041 Model Question Set B (NEB model question paper, Set B, 2079 (2023); Set A is already on the site as neb-model-2079). Answers are written for this site; check them against your class notes.
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