Question

Objective Type Question :
Answer in one Sentence only :

What is meant by discount on issue of shares?

Answer 1

As per Section 79 of the Companies Act, 1956, issuance of shares at a discount implies that shares are issued at a price below their par value, i.e. the face value of the shares. The discount on issuance of shares is debited to Discount on Issue of Shares Account. For example, a share with a face value of Rs 10 is issued at a discount of 10%. So, a discount of Re 1 per share will be offered and the share will be issued at Rs 9.