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Questions
State, with reason, whether securities premium can be used to write off bad debts.
State with reason whether securities premium can be used by a company to write off the discount allowed to its debtors.
Give Reasons
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Solution
Neither bad debts nor the discount granted to its debtors can be written off using “Securities Premium.” It is a capital profit that can only be utilized for the objectives listed in section 52 of the Companies Act of 2013. Allowing debtors to receive a discount is a revenue expense deducted from earnings.
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