What is the nature of Premium on Redemption of Debentures Account

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Confused, What is the nature of Premium on redemption of debentures account as per the syllabus of class 12

This topic is concerned with the Accounting for debentures chapter of Accountancy class 12.

Nature of Premium on Redemption of Debentures Account

Premium on Redemption of Debentures Account is a Personal Account (under the Traditional Approach).

It is also a Liability Account (under the Modern Approach) because it is a liability of the company to pay in the future, that is, at the time of redemption.

Where premium on redemption is shown in Balance Sheet

Premium on Redemption of Debentures Account is shown:

a) Under the main head ‘Non-Current Liabilities’ and Subhead ‘other long term liabilities’ If debentures are shown as ‘Long term Borrowings’.

b) Under the main head ‘Current Liabilities’ and the subhead ‘other current liabilities’ if Debentures are shown as ‘Current Maturities of Long term Debts’.

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