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.

When debentures are issued at a discount and are also redeemable at a premium, both the discount and the premium on redemption are capital losses. The book debits them together to Loss on Issue of Debentures Account. (When debentures are issued at a discount but redeemable at par, the discount alone may be debited to Discount on Issue of Debentures Account.)

Option (1) Amount of Discount on issue of Debentures cannot be debited into Loss on issue of Debentures Account. — Incorrect. It is the reverse of the rule: the discount is debited to that account when redemption is at a premium.

Option (3) Amount of Premium on Redemption of Debentures can be debited into Discount on issue of Debentures Account. — Incorrect. Premium on redemption is debited to Loss on Issue of Debentures Account; the discount account takes only a discount.

Option (4) Amount of Discount on issue of Debentures can be debited into Premium on Redemption of Debentures Account. — Incorrect. Premium on Redemption of Debentures is a liability account that is credited; a discount is never debited to it.