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Discount on Issue of Debentures

Discount on i...

Question

Discount on issue of shares is a ___________.

A

Capital loss

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B

Revenue loss

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C

Trading loss

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D

Financial loss

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Solution

The correct option is A Capital loss
When Shares are issued at a price lower than their face value, they are said to have been issued at a. discount. Discountallowed by the company on issue of shares is a capital loss. The amount is debited to '. Discounton issue of shares account'. Mostly, the discount is adjusted in the allotment money.

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Similar questions

Q. Discount on issue of shares is a capital loss.

Q. At the time of forfeiture of shares which were originally issued at a discount, the accounting entry will be
I. A Debit Share capital account with the called-up value of shares forfeited.
II. A Credit Share forfeiture account with the amount received on forfeited shares.
III. A Credit Discount on issue of shares with the amount of discount allowed on forfeited shares,
IV. A Credit Calls-in-arrears with the amount due but not paid on forfeited shares.

Q. The discount on re-issue of forfeited shares is debited to the ________ A/c.

Q. ___________ is used to writing off capital losses or issue of bonus shares in case of a company.

Q. Answer the question.
State whether the following are revenue or capital transactions.
(a) Carriage paid on goods bought.
(b) Legal expenses paid for illegal use of trade mark.
(c) Capital raised by issue of equity shares.
(d) Allowed discount on issue of shares.
(e) Cost of formation of a new company.
(f) Compensation paid to a discharged employee.

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