Is discount on issue of shares an asset?

Statement 1: Discount on issue of shares should be shown on the asset side of the balance sheet.

What is discount on issue of shares?

ADVERTISEMENTS: When Shares are issued at a price lower than their face value, they are said to have been issued at a discount. For example, if a share of Rs 100 is issued at Rs 95, then Rs 5 (i.e. Rs 100—95) is the amount of discount. … It is debited to separate account called ‘Discount on Issue of Share’ Account.

How do you treat discount on issue of shares on a balance sheet?

Solved Question on Issue of Shares at Discount

Answer: The company will show it in the balance sheet on the Assets side under the heading ‘Miscellaneous Expenditure’. This is a fictitious asset and should be gradually written off by transfer to P&L A/c although there is no compulsion to do so.

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Is discount on debenture a current asset?

ADVERTISEMENTS: Some of the methods used for the treatment of discount on issue of debentures are as follows: Discount on issue of debentures is a loss of capital nature. It will appear on the asset side of balance sheet till it is written off.

Is share issue expense a current asset?

It is shown under the head ”Other Current/Non-Current Assets” depending on whether the amount will be amortized in the next 12 month or thereafter.

When can shares be issued at discount?

(iv) the shares to be issued at a discount are issued within two months after the date on which the issue is sanctioned by the 3 Company Law Board] or within such extended time as the 3 Company Law Board] may allow.

Which shares are issued always at discount?

1. Sweat equity shares

  • These are issued by a Company to its Directors or Employees.
  • They can be issued at a discount or for consideration other than cash.

Which type of asset is discount on issue of debenture?

Discount on issue of debentures is treated as a capital loss. As per the revised schedule VI of the Companies Act, it should be shown on the Asset side of balance sheet under “Miscellaneous Expenditures” heading until it is written off.

Why shares should not be issued at discount?

Discounted prices may be offered when company is not able to pay its debts and offering it share to its creditors. Company Act 2013 strictly prohibited the companies to issue shares at discounted price. It invites penalty and imprisonment for directors. … So never think of discounted price.

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Can shares be issued at discount to public?

(1) Except as provided in section 54, a company shall not issue shares at a discount. (2) Any share issued by a company at a 1[discount] shall be void. per annum from the date of issue of such shares to the persons to whom such shares have been issued.] …

Where is share discount shown in balance sheet?

Statement 1: Discount on issue of shares should be shown on the asset side of the balance sheet. Statement 2: The discount has to be written off even through profit and loss account. Choose the correct.

Are shares current assets?

Current assets are all the assets of a company that are expected to be sold or used as a result of standard business operations over the next year. Current assets include cash, cash equivalents, accounts receivable, stock inventory, marketable securities, pre-paid liabilities, and other liquid assets.

Why discount on issue of debentures is a capital loss?

The amount of loss or discount on issue of debentures has to be not be written-off during the year of its issue since the benefit of the debentures would accumulate to the enterprise till their restitution or redemption. The loss or discount, hence, considered as a capital loss.

How do you account for share issues?

To account for the proceeds from the issue of shares up to their nominal value (face value). To account for the proceeds from the issue of shares over and above their nominal value (face value).

Initial Issue.

Debit Bank The total amount of cash received.
Credit Share Capital Account Amount up to nominal value
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Is share issue expenses a deferred revenue expenditure?

Deferred revenue expenditure is an expenditure which is revenue in nature and incurred during an accounting period but the benefits from this is to be arrived in coming years. Few examples of deferred revenue expenditure: … Heavy Advertisement expenses. Brokerage on issue of shares.

What are considered assets?

An asset is something containing economic value and/or future benefit. An asset can often generate cash flows in the future, such as a piece of machinery, a financial security, or a patent. Personal assets may include a house, car, investments, artwork, or home goods.