'Discount on issue of debentures', which is to be written off under o…

Read the following information carefully and answer the question.

A Limited took over assets of ₹3,00,000 and liabilities of ₹10,000 from X and co. Ltd. for an agreed purchase consideration of ₹2,70,000 to be satisfied by issue of 10% debentures of ₹100 each at a premium of 20%. The company also took a loan of ₹10,00,000 from Punjab National Bank and issued 10% debentures of ₹12,00,000 of ₹100 each as collateral security. The rate of Interest on loan is 12% p.a.

'Discount on issue of debentures', which is to be written off under one operating cycle is shown under :

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Other Current Assets

Discount on issue of debentures not yet written off is shown on the assets side. The part to be written off within 12 months (one operating cycle) is a current item; the part to be written off later is non-current.

Option (1) Other Non-current Assets — Incorrect. This head takes only the part to be written off after 12 months.

Option (3) Other Non-current Liabilities — Incorrect. Discount is a loss to be written off, not an amount the company owes.

Option (4) Other Current Liabilities — Incorrect. It is not a liability at all, so it cannot be a current liability.

NCERT (2026-27 edition):
Issue of Debentures at a Discount – “… When a debenture is issued at a price below its nominal value, it is said to be issued at a discount. For example, the issue of Rs. 100 debentures at Rs. 95, Rs. 5 being the amount of discount. The discount on issue of debentures can be written off either by debiting it to or out of Securities Premium Reserve, if any, during the life time of debentures. Discount on issue of debentures to be written off within 12 months of the balance sheet date or the period of operating cycle is shown under ‘Other Current Assets’ and the part which is to be written off after 12 months of balance sheet is shown under ‘Other Non-Current Assets’.”