Identify that account from which loss on issue of debentures can be written off when Securities Premium Reserve falls short.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Statement of Profit and Loss
Loss (or discount) on issue of debentures is a capital loss, written off in the year the debentures are issued. It is written off first from the Securities Premium Reserve; whatever that reserve cannot cover is written off against revenue profits, that is, the Statement of Profit and Loss.
Option (1) Debenture Redemption Reserve — Incorrect. This reserve is kept for redeeming debentures and cannot be used to write off a loss on their issue.
Option (3) Premium on redemption of Debentures A/c — Incorrect. This is a liability (the premium payable on redemption); it is the reason for the loss, not a source to write it off.
Option (4) Reserves and Surplus — Incorrect. This is only the balance-sheet head; the book names the Statement of Profit and Loss as the account to bear the balance.
NCERT (2026-27 edition):
|
