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Home Questions S7R7WJ4UV7
Target Exam

CUET

Subject

Accountancy

Chapter

Issue and Redemption of Debentures

Question:

There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below.

Assertion (A):  The 'discount on debentures issuance is charged to 'Securities Premium Account' and is reflected as an asset.
Reason (R):  The 'discount on debentures' issuance is noted as a capital loss on the asset side as a fictitious asset. Hence, has to be written off during the year of its issue.

Options:

Both (A) and (R) are true, but (R) is the correct explanation of (A).

Both (A) and (R) are true, but (R) is not the correct explanation of (A).

(A) is true, but (R) is false.

(A) is false, but (R) is true.

Correct Answer:

Both (A) and (R) are true, but (R) is the correct explanation of (A).

Explanation:

The 'discount on debentures' issuance is noted as a capital loss and is charged to 'Securities Premium Account' and is reflected on the asset side as a fictitious asset. Hence, has to be written off during the year of its issue.

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