Question

What is meant by 'Premium on Redemption of Debentures'?

Answer 1

When the debentures are redeemed at a price more than its face value or the par value, then it is said that the debentures are redeemed at premium. The difference between the redeemed price and the par value is regarded as a capital loss and this loss is written off till the redemption of the debentures.

The Premium on redemption of debenture is shown on the liabilities side of the balance sheet under the head of "current liabilities and provisions" until debentures are redeemed.