Accountancy Part AIssue and Redemption of Debentures

Discount on issue of 8% debentures is shown in the balance sheet as:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → Other current assets

Discount on issue of debentures is a capital loss written off over the years. Until it is written off it sits in the balance sheet as an asset: the part to be written off within 12 months of the balance sheet date (or the operating cycle) goes under Other Current Assets, and the rest under Other Non-Current Assets.

Option (2) Short term loans and advances — Incorrect. Loans and advances are amounts recoverable from others; a discount is a loss waiting to be written off.

Option (3) Long term loans and advances — Incorrect. For the same reason, it is not a loan or advance of any term.

Option (4) Other current liabilities — Incorrect. The discount is not owed to anyone, so it is never a liability.

NCERT (2026-27 edition):
Issue of Debentures at a Discount – “… 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’.”