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

Discount on Issue of Debentures represents a capital loss that occurs when debentures are issued below their face value. This discount cannot be written off entirely in the year of issue as it would distort the profit for that particular year.

Therefore, it is treated as a fictitious asset (or deferred revenue expenditure) and must be written off gradually over the life of the debentures.

Balance Sheet Classification:

The unamortized (unwritten-off) portion of discount on issue of debentures appears on the Assets side of the Balance Sheet.

As per Schedule III of the Companies Act, 2013, it is shown under:

• Other Current Assets - if the amount is to be written off within 12 months
• Other Non-Current Assets - if the amount is to be written off after 12 months

Since the question mentions it generally without specifying the time period for write-off, and Option 1 is marked correct, the portion to be written off in the current year is classified under Other Current Assets.

This is similar to how we treat preliminary expenses or other deferred expenses - they appear as assets until completely amortized, with the current year's portion shown under current assets.