Choose the correct statement.

The correct answer is option 2- Amount of Discount on issue of Debentures can be debited into Loss on issue of Debentures Account.

Discount on issue of debentures and premium on redemption both represent losses to the company. These are capital losses, and are accumulated under one accounting head: "Loss on Issue of Debentures Account". So, when debentures are issued at a discount (or redeemed at a premium), the Loss on Issue of Debentures A/c is debited. 

Journal entry for the issue at discount and redemption at premium-

1) Bank A/c Dr.
        To Debenture Application & Allotment A/c
(Receipt of application money)

2) Debenture Application & Allotment A/c Dr.
    Loss on Issue of Debentures A/c Dr. (with discount on issue plus premium on redemption)
       To Debentures A/c (with nominal value of debenture)
       To Premium on Redemption of Debentures A/c (with premium on redemption)
(Allotment of debentures at a discount and redeemable at premium)