Timex Ltd issued 1000 8% debentures of RS 100 each.give appropriate journal entries..
1) Issued at a discount of 5% ,repayable at a premium of 10%
Journal entry
Bank a/c dr 95000 Dis on issue of debentures a/c Dr 5000 Loss on issue of debentures a/c dr 10000 To 8% debentures a/c Dr 100000 To premium on redemption of debentures a/c dr 10000
Can anyone please explain me why loss on issue of debentures should be debited and premium on redemption should be credited ???