Question

Statement $1$: Discount on issue of shares should be shown on the asset side of the balance sheet.
Statement $2$: The discount has to be written off even through profit and loss account
Choose the correct.

• A. Both the statements $1$ and $2$ are correct
• B. Statement $1$ is correct but statement $2$ is false
• C. Statement $1$ is false but statement $2$ is correct
• D. Both the statement $1$ and $2$ are false

Answer 1

The correct option is A Both the statements $1$ and $2$ are correct

In the balance sheet, 'Discount on Issue of Shares Account' appears on the “Assets” side under the heading 'Miscellaneous Expenditure'.

Since debentures are for five years, every year fifth of the discount can be taken to profit and loss account.

In the ratio of amount used. Since in this case the plan of redemption is given it is possible to write off discount in the ratio of amount used.