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Debenture premium cannot be used to _____.
- a)Write off the discount on issue of shares or debentures
- b)Write off the premium on redemption of shares or debentures
- c)Pay dividends
- d)Write off capital loss
Correct answer is option 'C'. Can you explain this answer?
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Debenture premium cannot be used to _____.a)Write off the discount on ...
Debenture premium and its usage
Debenture premium is the amount that is paid in excess of the face value of a debenture at the time of issue. It is a capital reserve and cannot be used for all purposes. Let's understand the usage of debenture premium in detail.
Write off the discount on issue of shares or debentures
Debenture premium cannot be used to write off the discount on the issue of shares or debentures. Discount is the amount by which the issue price of shares or debentures is less than the face value. It is charged to the profit and loss account over the period of the debenture or share. Debenture premium and discount are two different things, and debenture premium cannot be used to write off discount.
Write off the premium on redemption of shares or debentures
Debenture premium can be used to write off the premium on redemption of shares or debentures. Redemption premium is the amount paid in excess of face value at the time of redemption of shares or debentures. It is a capital loss, and can be written off against debenture premium.
Pay dividends
Debenture premium cannot be used to pay dividends. Dividends are paid out of profits earned by a company, and debenture premium is a capital reserve. It cannot be used to pay dividends.
Write off capital loss
Debenture premium cannot be used to write off capital loss. Capital loss arises when the assets of a company are sold at a price lower than their book value. It is charged to the profit and loss account, and cannot be written off against debenture premium.
Conclusion
Debenture premium is a capital reserve and can be used to write off the premium on redemption of shares or debentures. It cannot be used to write off discount, pay dividends, or write off capital loss.
Debenture premium is the amount that is paid in excess of the face value of a debenture at the time of issue. It is a capital reserve and cannot be used for all purposes. Let's understand the usage of debenture premium in detail.
Write off the discount on issue of shares or debentures
Debenture premium cannot be used to write off the discount on the issue of shares or debentures. Discount is the amount by which the issue price of shares or debentures is less than the face value. It is charged to the profit and loss account over the period of the debenture or share. Debenture premium and discount are two different things, and debenture premium cannot be used to write off discount.
Write off the premium on redemption of shares or debentures
Debenture premium can be used to write off the premium on redemption of shares or debentures. Redemption premium is the amount paid in excess of face value at the time of redemption of shares or debentures. It is a capital loss, and can be written off against debenture premium.
Pay dividends
Debenture premium cannot be used to pay dividends. Dividends are paid out of profits earned by a company, and debenture premium is a capital reserve. It cannot be used to pay dividends.
Write off capital loss
Debenture premium cannot be used to write off capital loss. Capital loss arises when the assets of a company are sold at a price lower than their book value. It is charged to the profit and loss account, and cannot be written off against debenture premium.
Conclusion
Debenture premium is a capital reserve and can be used to write off the premium on redemption of shares or debentures. It cannot be used to write off discount, pay dividends, or write off capital loss.
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Debenture premium cannot be used to _____.a)Write off the discount on issue of shares or debenturesb)Write off the premium on redemption of shares or debenturesc)Pay dividendsd)Write off capital lossCorrect answer is option 'C'. Can you explain this answer?
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