How would you deal with ‘Premium on Redemption of Debentures?
When debentures are redeemable at a premium, the premium payable on redemption is debited to Loss on Issue of Debentures A/c. If the debentures are issued at a discount and are redeemable at a premium, the amount of discount on issue is also debited to the Loss on Issue of Debentures A/c.
Premium on redemption is a liability of the company payable in the future. It is a provision and is shown on the liabilities side of the Balance Sheet under the head Non-current Liabilities under the subhead Long-term Borrowings until the debentures are redeemed.
Explanation
The answer is derived from the 'Notes' section in the provided context. Note 1 explicitly states the accounting treatment for the premium payable on redemption (debiting 'Loss on Issue of Debentures A/c'). Note 2 clarifies the presentation in the financial statements, identifying it as a provision under 'Long-term Borrowings'.