Securities premium account

Write off means reducing the value of something. Above statement means balance in SPR account can be used (SPR A/c ..Dr. to Discount) to write off discount. Note that discount on issue of debentures is a capital loss and is either charged against the profits over a period of time (3 to 5 years or during the duration of debentures) or against Securities Premium. Numerically, you receive 95 for Rs.100 debenture (Cash increases by 95, liabilities side by 100, 5 is shown as negative figure in liabilities). Now that 5 has to go from books during duration of debentures. So you either charge it over a period of time against profits or use Securities premium i.e. reduce securities premium by 5 and discount goes off.

Sahibdeep Singh

CA Inter

★ 14K+

25-Feb-21 11:24