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Direction: Choose the correct answer to the following questions from the given alternatives:
Discount on issue of debentures is shown under which head in the balance sheet?
  • a)
    Reserves and Surplus
  • b)
    Miscellaneous expenditure
  • c)
    Current assets
  • d)
    Non-current liabilities
Correct answer is option 'B'. Can you explain this answer?
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Direction: Choose the correct answer to the following questions from t...
Explanation:


  • Discount on issue of debentures: When a company issues debentures at a price lower than their face value, the difference between the face value and the issue price is known as discount on issue of debentures.

  • Classification in balance sheet: The discount on issue of debentures is considered as a deferred revenue expenditure and hence shown under the head of Miscellaneous Expenditure in the balance sheet.

  • Reason for classification: The discount is treated as a capital loss for the company, and it is amortized over the period of debentures. Therefore, it is not considered as a current asset or non-current liability but rather as an expenditure that has been incurred for issuing debentures at a discount.

  • Impact on financial statements: Showing the discount under Miscellaneous Expenditure helps in reflecting the true financial position of the company by adjusting the total liabilities with the amount of discount that needs to be amortized over time.

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Direction: Choose the correct answer to the following questions from the given alternatives:Discount on issue of debentures is shown under which head in the balance sheet?a)Reserves and Surplusb)Miscellaneous expenditurec)Current assetsd)Non-current liabilitiesCorrect answer is option 'B'. Can you explain this answer?
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