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 Page 1


 
     
 
3 On transfer of money from surplus in Statement of P & L A/C    
 Surplus in Statement of P & L A/C                    dr. 
 To debenture redemption reserve a/c 
(Transfer of profits equal to 25% of the nominal value of debentures issued) always 
on 31/3 before the redemption of debentures. 
25%= 
100% 
 
25%= 
100% 
? Entry should be passed on 31/3 before the  process of redemption of debentures begins 
? Entry should be passed with the minimum 25 % of the amount of the debentures which were issued 
 For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be of 
  25% of Rs. 1,00,000 = Rs.25000 
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will be of 
  25% of Rs. 1,00,000 = Rs.25000 
? If no information is available then it is assumed debentures are redeemed – 25% out of profits. 
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the 
debentures which were issued 
 
  
6 Debenture Redemption Reserve a/c                                            dr. 
  To General Reserve a/c 
Always on 31/3 in which all the debentures are redeemed 
25%= 
100% 
 
25%= 
100% 
? Entry is always on the date of redemption 
? Entry is passed only when the process of redemption ends  
For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be 
of 25% of Rs. 1,00,000 = Rs.25000 on the date redemption  
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will not be passed as 
all the debnetures had not been redeemed  
? If no information is available then it is assumed debentures are redeemed – 25% out of profits. 
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the 
debentures which were issued 
 
Case 1. 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The 
issue was fully subscribed. The Board of Directors decided to transfer the required amount to Debenture Redemption 
Reserve on March 31, 2015. It was decided to invest 15% of the face value of debentures to be redeemed towards 
Debenture Redemption Investment on 30th April, 2015. Investments were encashed and Debentures were redeemed on 
due date.  
Solution 
Date Particulars L.F. DR. CR. 
30/6/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
30/6/11 6% Debenture Application & allotment a/c                            Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
31/3/15 Surplus in Statement of Profit & Loss                                      Dr. 
To Debenture Redemption Reserve A/c 
 
2,50,000  
2,50,000 
30/4/15 Debenture Redemption Investment a/c                                  Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
30/6/15 Bank a/c                                                                                        Dr. 
To Debenture Redemption Investment a/c    
 
1,50,000 
 
 
1,50,000 
30/6/15 6% Debentures a/c                                                                      Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
30/6/15 Debenture holder's a/c                                                                Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
30/6/15 Debenture Redemption Reserve A/c                                       Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
       Case 2 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were 
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture 
Page 2


 
     
 
3 On transfer of money from surplus in Statement of P & L A/C    
 Surplus in Statement of P & L A/C                    dr. 
 To debenture redemption reserve a/c 
(Transfer of profits equal to 25% of the nominal value of debentures issued) always 
on 31/3 before the redemption of debentures. 
25%= 
100% 
 
25%= 
100% 
? Entry should be passed on 31/3 before the  process of redemption of debentures begins 
? Entry should be passed with the minimum 25 % of the amount of the debentures which were issued 
 For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be of 
  25% of Rs. 1,00,000 = Rs.25000 
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will be of 
  25% of Rs. 1,00,000 = Rs.25000 
? If no information is available then it is assumed debentures are redeemed – 25% out of profits. 
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the 
debentures which were issued 
 
  
6 Debenture Redemption Reserve a/c                                            dr. 
  To General Reserve a/c 
Always on 31/3 in which all the debentures are redeemed 
25%= 
100% 
 
25%= 
100% 
? Entry is always on the date of redemption 
? Entry is passed only when the process of redemption ends  
For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be 
of 25% of Rs. 1,00,000 = Rs.25000 on the date redemption  
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will not be passed as 
all the debnetures had not been redeemed  
? If no information is available then it is assumed debentures are redeemed – 25% out of profits. 
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the 
debentures which were issued 
 
Case 1. 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The 
issue was fully subscribed. The Board of Directors decided to transfer the required amount to Debenture Redemption 
Reserve on March 31, 2015. It was decided to invest 15% of the face value of debentures to be redeemed towards 
Debenture Redemption Investment on 30th April, 2015. Investments were encashed and Debentures were redeemed on 
due date.  
Solution 
Date Particulars L.F. DR. CR. 
30/6/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
30/6/11 6% Debenture Application & allotment a/c                            Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
31/3/15 Surplus in Statement of Profit & Loss                                      Dr. 
To Debenture Redemption Reserve A/c 
 
2,50,000  
2,50,000 
30/4/15 Debenture Redemption Investment a/c                                  Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
30/6/15 Bank a/c                                                                                        Dr. 
To Debenture Redemption Investment a/c    
 
1,50,000 
 
 
1,50,000 
30/6/15 6% Debentures a/c                                                                      Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
30/6/15 Debenture holder's a/c                                                                Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
30/6/15 Debenture Redemption Reserve A/c                                       Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
       Case 2 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were 
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture 
 
     
 
Redemption Reserve on March 31, 2014. It was decided to invest 15% of the face value of debentures to be redeemed 
towards 10% Debenture Redemption Investment (govt. securities) on 30th April in the year in which the debentures were 
to be redeemed. Investments were encashed and Debentures were redeemed on due date.  
Solution  
Date Particulars L.F. DR. CR. 
1/4/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
1/4/11 6% Debenture Application & allotment a/c                           Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
30/4/14 Debenture Redemption Investment a/c                                Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
31/3/15 Bank a/c                                                                                      Dr. 
To Debenture Redemption Investment a/c    
To interest a/c (earned for 11 months) 
 
1,53,750 
 
 
1,50,000 
  1,3750 
31/3/15 Surplus in Statement of Profit & Loss                                      Dr. 
To Debenture Redemption Reserve A/c 
 
2,50,000  
2,50,000 
31/3/15 6% Debentures a/c                                                                      Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
31/3/15 Debenture holder's a/c                                                              Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
31/3/15 Debenture Redemption Reserve A/c                                      Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
Case 3 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were 
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture 
Redemption Reserve on March 31, 2014. It was decided to invest 15% of the face value of debentures to be redeemed 
towards 10% Debenture Redemption Investment (govt. securities) on 30th April in the year in which the debentures were 
to be redeemed and rate to T.D.S paid to the govt. was 20%. Investments were encashed and Debentures were 
redeemed. 
Solution  
Date Particulars L.F. DR. CR. 
1/4/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
1/4/11 6% Debenture Application & allotment a/c                           Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
30/4/14 Debenture Redemption Investment a/c                                 Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
31/3/15 Bank a/c                                                                                        Dr. 
To T.D.S. A/C  
To Debenture Redemption Investment a/c    
To interest a/c (earned for 11 months) 
 
1,51,000 
     2,750 
 
 
 
1,50,000 
  1,3750 
31/3/15 Surplus in Statement of Profit & Loss                                      Dr. 
To Debenture Redemption Reserve A/c 
 
2,50,000  
2,50,000 
31/3/15 6% Debentures a/c                                                                      Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
31/3/15 Debenture holder's a/c                                                              Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
31/3/15 Debenture Redemption Reserve A/c                                       Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
 
Case 4 
Punjab national bank Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the 
debentures were redeemable on 31st March, 2015. Pass necessary entries for issue and redemption of debentures. How 
much amount of Debenture Redemption Reserve is to be created before redemption of debentures?  
  Solution  
Page 3


 
     
 
3 On transfer of money from surplus in Statement of P & L A/C    
 Surplus in Statement of P & L A/C                    dr. 
 To debenture redemption reserve a/c 
(Transfer of profits equal to 25% of the nominal value of debentures issued) always 
on 31/3 before the redemption of debentures. 
25%= 
100% 
 
25%= 
100% 
? Entry should be passed on 31/3 before the  process of redemption of debentures begins 
? Entry should be passed with the minimum 25 % of the amount of the debentures which were issued 
 For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be of 
  25% of Rs. 1,00,000 = Rs.25000 
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will be of 
  25% of Rs. 1,00,000 = Rs.25000 
? If no information is available then it is assumed debentures are redeemed – 25% out of profits. 
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the 
debentures which were issued 
 
  
6 Debenture Redemption Reserve a/c                                            dr. 
  To General Reserve a/c 
Always on 31/3 in which all the debentures are redeemed 
25%= 
100% 
 
25%= 
100% 
? Entry is always on the date of redemption 
? Entry is passed only when the process of redemption ends  
For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be 
of 25% of Rs. 1,00,000 = Rs.25000 on the date redemption  
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will not be passed as 
all the debnetures had not been redeemed  
? If no information is available then it is assumed debentures are redeemed – 25% out of profits. 
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the 
debentures which were issued 
 
Case 1. 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The 
issue was fully subscribed. The Board of Directors decided to transfer the required amount to Debenture Redemption 
Reserve on March 31, 2015. It was decided to invest 15% of the face value of debentures to be redeemed towards 
Debenture Redemption Investment on 30th April, 2015. Investments were encashed and Debentures were redeemed on 
due date.  
Solution 
Date Particulars L.F. DR. CR. 
30/6/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
30/6/11 6% Debenture Application & allotment a/c                            Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
31/3/15 Surplus in Statement of Profit & Loss                                      Dr. 
To Debenture Redemption Reserve A/c 
 
2,50,000  
2,50,000 
30/4/15 Debenture Redemption Investment a/c                                  Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
30/6/15 Bank a/c                                                                                        Dr. 
To Debenture Redemption Investment a/c    
 
1,50,000 
 
 
1,50,000 
30/6/15 6% Debentures a/c                                                                      Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
30/6/15 Debenture holder's a/c                                                                Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
30/6/15 Debenture Redemption Reserve A/c                                       Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
       Case 2 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were 
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture 
 
     
 
Redemption Reserve on March 31, 2014. It was decided to invest 15% of the face value of debentures to be redeemed 
towards 10% Debenture Redemption Investment (govt. securities) on 30th April in the year in which the debentures were 
to be redeemed. Investments were encashed and Debentures were redeemed on due date.  
Solution  
Date Particulars L.F. DR. CR. 
1/4/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
1/4/11 6% Debenture Application & allotment a/c                           Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
30/4/14 Debenture Redemption Investment a/c                                Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
31/3/15 Bank a/c                                                                                      Dr. 
To Debenture Redemption Investment a/c    
To interest a/c (earned for 11 months) 
 
1,53,750 
 
 
1,50,000 
  1,3750 
31/3/15 Surplus in Statement of Profit & Loss                                      Dr. 
To Debenture Redemption Reserve A/c 
 
2,50,000  
2,50,000 
31/3/15 6% Debentures a/c                                                                      Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
31/3/15 Debenture holder's a/c                                                              Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
31/3/15 Debenture Redemption Reserve A/c                                      Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
Case 3 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were 
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture 
Redemption Reserve on March 31, 2014. It was decided to invest 15% of the face value of debentures to be redeemed 
towards 10% Debenture Redemption Investment (govt. securities) on 30th April in the year in which the debentures were 
to be redeemed and rate to T.D.S paid to the govt. was 20%. Investments were encashed and Debentures were 
redeemed. 
Solution  
Date Particulars L.F. DR. CR. 
1/4/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
1/4/11 6% Debenture Application & allotment a/c                           Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
30/4/14 Debenture Redemption Investment a/c                                 Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
31/3/15 Bank a/c                                                                                        Dr. 
To T.D.S. A/C  
To Debenture Redemption Investment a/c    
To interest a/c (earned for 11 months) 
 
1,51,000 
     2,750 
 
 
 
1,50,000 
  1,3750 
31/3/15 Surplus in Statement of Profit & Loss                                      Dr. 
To Debenture Redemption Reserve A/c 
 
2,50,000  
2,50,000 
31/3/15 6% Debentures a/c                                                                      Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
31/3/15 Debenture holder's a/c                                                              Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
31/3/15 Debenture Redemption Reserve A/c                                       Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
 
Case 4 
Punjab national bank Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the 
debentures were redeemable on 31st March, 2015. Pass necessary entries for issue and redemption of debentures. How 
much amount of Debenture Redemption Reserve is to be created before redemption of debentures?  
  Solution  
 
     
 
Date Particulars L.F. DR. CR. 
1/4/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
1/4/11 6% Debenture Application & allotment a/c                   Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
31/3/15 6% Debentures a/c                                                                Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
31/3/15 Debenture holder's a/c                                                        Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
? As per Section 17 (4) with rule 18 (7) a Banking Company is not required to create Debenture Redemption 
Reserve 
? A Company which is not required to create DRR is exempted from Investing 15% amount also. 
Case 5 
X Ltd. has 10,000, 6% Debentures of Rs.100 each due for redemption on 31st March 2015. Assume that Debenture 
Redemption Reserve has a balance of Rs.1,50,000 on that date. It was decided to invest the required amount towards 
Debenture Redemption Investment. 
Solution 
Date Particulars L.F. DR. CR. 
30/4/14 Debenture Redemption Investment a/c                       Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
30/4/15 Bank a/c                                                                              Dr. 
To Debenture Redemption Investment a/c    
 
1,50,000 
 
 
1,50,000 
31/3/15 Surplus in Statement of Profit & Loss                            Dr. 
To Debenture Redemption Reserve A/c 
 
1,00,000  
1,00,000 
30/6/15 6% Debentures a/c                                                            Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
30/6/15 Debenture holder's a/c                                                    Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
31/3/15 Debenture Redemption Reserve A/c                            Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
Case 6 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 of which half of the amount is due 
for redemption on June 30,2015. The Board of Directors decided to transfer the required amount to Debenture 
Redemption Reserve on March 31, 2015. Record the necessary entries. 
Solution  
Date Particulars L.F. DR. CR. 
31/3/15 Surplus in Statement of Profit & Loss                           Dr. 
To Debenture Redemption Reserve A/c 
 
2,50,000  
2,50,000 
30/4/15 Debenture Redemption Investment a/c                      Dr. 
 To bank a/c 
 
75,000  
75,000 
30/6/15 Bank a/c                                                                             Dr. 
To Debenture Redemption Investment a/c    
 
75,000 
 
 
75,000 
30/6/15 6% Debentures a/c                                                          Dr. 
   To Debenture holder's a/c 
 
5,00,000 
 
 
5,00,000 
30/6/15 Debenture holder's a/c                                                  Dr.   
     To bank a/c 
 
5,00,000  
5,00,000 
? As all the debentures have not been redeemed so the last entry is not passed. 
? Investments are purchased of the value of the debentures which are to be redeemed.  
Case 7 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 of which half of the amount is due 
for redemption on June 30,2015. The Board of Directors decided to transfer the required amount to Debenture 
Redemption Reserve on March 31, 2015. The company has in its Debenture Redemption Reserve Account a balance of 
Rs.40,000. Record the necessary entries. 
Solution  
Date Particulars L.F. DR. CR. 
31/3/15 Surplus in Statement of Profit & Loss                           Dr.  2,10,000  
Page 4


 
     
 
3 On transfer of money from surplus in Statement of P & L A/C    
 Surplus in Statement of P & L A/C                    dr. 
 To debenture redemption reserve a/c 
(Transfer of profits equal to 25% of the nominal value of debentures issued) always 
on 31/3 before the redemption of debentures. 
25%= 
100% 
 
25%= 
100% 
? Entry should be passed on 31/3 before the  process of redemption of debentures begins 
? Entry should be passed with the minimum 25 % of the amount of the debentures which were issued 
 For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be of 
  25% of Rs. 1,00,000 = Rs.25000 
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will be of 
  25% of Rs. 1,00,000 = Rs.25000 
? If no information is available then it is assumed debentures are redeemed – 25% out of profits. 
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the 
debentures which were issued 
 
  
6 Debenture Redemption Reserve a/c                                            dr. 
  To General Reserve a/c 
Always on 31/3 in which all the debentures are redeemed 
25%= 
100% 
 
25%= 
100% 
? Entry is always on the date of redemption 
? Entry is passed only when the process of redemption ends  
For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be 
of 25% of Rs. 1,00,000 = Rs.25000 on the date redemption  
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will not be passed as 
all the debnetures had not been redeemed  
? If no information is available then it is assumed debentures are redeemed – 25% out of profits. 
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the 
debentures which were issued 
 
Case 1. 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The 
issue was fully subscribed. The Board of Directors decided to transfer the required amount to Debenture Redemption 
Reserve on March 31, 2015. It was decided to invest 15% of the face value of debentures to be redeemed towards 
Debenture Redemption Investment on 30th April, 2015. Investments were encashed and Debentures were redeemed on 
due date.  
Solution 
Date Particulars L.F. DR. CR. 
30/6/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
30/6/11 6% Debenture Application & allotment a/c                            Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
31/3/15 Surplus in Statement of Profit & Loss                                      Dr. 
To Debenture Redemption Reserve A/c 
 
2,50,000  
2,50,000 
30/4/15 Debenture Redemption Investment a/c                                  Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
30/6/15 Bank a/c                                                                                        Dr. 
To Debenture Redemption Investment a/c    
 
1,50,000 
 
 
1,50,000 
30/6/15 6% Debentures a/c                                                                      Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
30/6/15 Debenture holder's a/c                                                                Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
30/6/15 Debenture Redemption Reserve A/c                                       Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
       Case 2 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were 
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture 
 
     
 
Redemption Reserve on March 31, 2014. It was decided to invest 15% of the face value of debentures to be redeemed 
towards 10% Debenture Redemption Investment (govt. securities) on 30th April in the year in which the debentures were 
to be redeemed. Investments were encashed and Debentures were redeemed on due date.  
Solution  
Date Particulars L.F. DR. CR. 
1/4/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
1/4/11 6% Debenture Application & allotment a/c                           Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
30/4/14 Debenture Redemption Investment a/c                                Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
31/3/15 Bank a/c                                                                                      Dr. 
To Debenture Redemption Investment a/c    
To interest a/c (earned for 11 months) 
 
1,53,750 
 
 
1,50,000 
  1,3750 
31/3/15 Surplus in Statement of Profit & Loss                                      Dr. 
To Debenture Redemption Reserve A/c 
 
2,50,000  
2,50,000 
31/3/15 6% Debentures a/c                                                                      Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
31/3/15 Debenture holder's a/c                                                              Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
31/3/15 Debenture Redemption Reserve A/c                                      Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
Case 3 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were 
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture 
Redemption Reserve on March 31, 2014. It was decided to invest 15% of the face value of debentures to be redeemed 
towards 10% Debenture Redemption Investment (govt. securities) on 30th April in the year in which the debentures were 
to be redeemed and rate to T.D.S paid to the govt. was 20%. Investments were encashed and Debentures were 
redeemed. 
Solution  
Date Particulars L.F. DR. CR. 
1/4/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
1/4/11 6% Debenture Application & allotment a/c                           Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
30/4/14 Debenture Redemption Investment a/c                                 Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
31/3/15 Bank a/c                                                                                        Dr. 
To T.D.S. A/C  
To Debenture Redemption Investment a/c    
To interest a/c (earned for 11 months) 
 
1,51,000 
     2,750 
 
 
 
1,50,000 
  1,3750 
31/3/15 Surplus in Statement of Profit & Loss                                      Dr. 
To Debenture Redemption Reserve A/c 
 
2,50,000  
2,50,000 
31/3/15 6% Debentures a/c                                                                      Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
31/3/15 Debenture holder's a/c                                                              Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
31/3/15 Debenture Redemption Reserve A/c                                       Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
 
Case 4 
Punjab national bank Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the 
debentures were redeemable on 31st March, 2015. Pass necessary entries for issue and redemption of debentures. How 
much amount of Debenture Redemption Reserve is to be created before redemption of debentures?  
  Solution  
 
     
 
Date Particulars L.F. DR. CR. 
1/4/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
1/4/11 6% Debenture Application & allotment a/c                   Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
31/3/15 6% Debentures a/c                                                                Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
31/3/15 Debenture holder's a/c                                                        Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
? As per Section 17 (4) with rule 18 (7) a Banking Company is not required to create Debenture Redemption 
Reserve 
? A Company which is not required to create DRR is exempted from Investing 15% amount also. 
Case 5 
X Ltd. has 10,000, 6% Debentures of Rs.100 each due for redemption on 31st March 2015. Assume that Debenture 
Redemption Reserve has a balance of Rs.1,50,000 on that date. It was decided to invest the required amount towards 
Debenture Redemption Investment. 
Solution 
Date Particulars L.F. DR. CR. 
30/4/14 Debenture Redemption Investment a/c                       Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
30/4/15 Bank a/c                                                                              Dr. 
To Debenture Redemption Investment a/c    
 
1,50,000 
 
 
1,50,000 
31/3/15 Surplus in Statement of Profit & Loss                            Dr. 
To Debenture Redemption Reserve A/c 
 
1,00,000  
1,00,000 
30/6/15 6% Debentures a/c                                                            Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
30/6/15 Debenture holder's a/c                                                    Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
31/3/15 Debenture Redemption Reserve A/c                            Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
Case 6 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 of which half of the amount is due 
for redemption on June 30,2015. The Board of Directors decided to transfer the required amount to Debenture 
Redemption Reserve on March 31, 2015. Record the necessary entries. 
Solution  
Date Particulars L.F. DR. CR. 
31/3/15 Surplus in Statement of Profit & Loss                           Dr. 
To Debenture Redemption Reserve A/c 
 
2,50,000  
2,50,000 
30/4/15 Debenture Redemption Investment a/c                      Dr. 
 To bank a/c 
 
75,000  
75,000 
30/6/15 Bank a/c                                                                             Dr. 
To Debenture Redemption Investment a/c    
 
75,000 
 
 
75,000 
30/6/15 6% Debentures a/c                                                          Dr. 
   To Debenture holder's a/c 
 
5,00,000 
 
 
5,00,000 
30/6/15 Debenture holder's a/c                                                  Dr.   
     To bank a/c 
 
5,00,000  
5,00,000 
? As all the debentures have not been redeemed so the last entry is not passed. 
? Investments are purchased of the value of the debentures which are to be redeemed.  
Case 7 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 of which half of the amount is due 
for redemption on June 30,2015. The Board of Directors decided to transfer the required amount to Debenture 
Redemption Reserve on March 31, 2015. The company has in its Debenture Redemption Reserve Account a balance of 
Rs.40,000. Record the necessary entries. 
Solution  
Date Particulars L.F. DR. CR. 
31/3/15 Surplus in Statement of Profit & Loss                           Dr.  2,10,000  
 
     
 
To Debenture Redemption Reserve A/c 2,10,000 
30/4/15 Debenture Redemption Investment a/c                      Dr. 
 To bank a/c 
 
75,000  
75,000 
30/6/15 Bank a/c                                                                              Dr. 
To Debenture Redemption Investment a/c    
 
75,000 
 
 
75,000 
30/6/15 6% Debentures a/c                                                           Dr. 
   To Debenture holder's a/c 
 
5,00,000 
 
 
5,00,000 
30/6/15 Debenture holder's a/c                                                   Dr.   
     To bank a/c 
 
5,00,000  
5,00,000 
? As all the debentures have not been redeemed so the last entry is not passed. 
? Investments are purchased of the value of the debentures which are to be redeemed.  
Case 8 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The 
issue was fully subscribed. The Board of Directors decided to redeem these debentures fully out of profits. It was decided 
to invest 15% of the face value of debentures to be redeemed towards Debenture Redemption Investment on 30th April, 
2015. Investments were encashed and Debentures were redeemed on due date. 
Solution   
Date Particulars L.F. DR. CR. 
30/6/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
30/6/11 6% Debenture Application & allotment a/c                            Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
31/3/15 Surplus in Statement of Profit & Loss                                    Dr. 
To Debenture Redemption Reserve A/c 
 
10,00,000 
 
 
10,00,000 
30/4/15 Debenture Redemption Investment a/c                                 Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
30/6/15 Bank a/c                                                                                      Dr. 
To Debenture Redemption Investment a/c    
 
1,50,000 
 
 
1,50,000 
30/6/15 6% Debentures a/c                                                                      Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
30/6/15 Debenture holder's a/c                                                                Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
30/6/15 Debenture Redemption Reserve A/c                                      Dr. 
To General Reserve a/c  
 
10,00,000 
 
 
10,00,000 
Case 9 
X Ltd. redeemed Rs.10,00,000, 6% debentures at a premium of 5% out of profits on 30-6-2015. The company had a 
Debenture Redemption Reserve of Rs.1,50,000. Assuming that the Company has the required balance in Debenture 
Redemption Investment Account, pass necessary journal entries for the redemption of debentures. 
Solution   
Date Particulars L.F. DR CR. 
31/3/15 Surplus in Statement of Profit & Loss                           Dr. 
To Debenture Redemption Reserve A/c 
 
1,00,000  
1,00,000 
30/4/15 Debenture Redemption Investment a/c                      Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
30/6/15 Bank a/c                                                                             Dr. 
To Debenture Redemption Investment a/c    
 
1,50,000 
 
 
1,50,000 
30/6/15 6% Debentures a/c                                                          Dr. 
Premium on redemption a/c                                         Dr. 
   To Debenture holder's a/c 
 
10,00,000 
50,000 
 
 
 
10,50,000 
30/6/15 Debenture holder's a/c                                                  Dr.   
     To bank a/c 
 
10,50,000  
10,50,000 
30/6/15 Debenture Redemption Reserve A/c                           Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
Case 10 
X Ltd. Had a balance of Rs.12,00,000 in its Statement of Profit & Loss a/c . instead of declaring a dividend the co. 
redeemed Rs.10,00,000, 6% debentures at a premium of 5% out of profits on 31-3-2015. The company had a Debenture 
Page 5


 
     
 
3 On transfer of money from surplus in Statement of P & L A/C    
 Surplus in Statement of P & L A/C                    dr. 
 To debenture redemption reserve a/c 
(Transfer of profits equal to 25% of the nominal value of debentures issued) always 
on 31/3 before the redemption of debentures. 
25%= 
100% 
 
25%= 
100% 
? Entry should be passed on 31/3 before the  process of redemption of debentures begins 
? Entry should be passed with the minimum 25 % of the amount of the debentures which were issued 
 For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be of 
  25% of Rs. 1,00,000 = Rs.25000 
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will be of 
  25% of Rs. 1,00,000 = Rs.25000 
? If no information is available then it is assumed debentures are redeemed – 25% out of profits. 
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the 
debentures which were issued 
 
  
6 Debenture Redemption Reserve a/c                                            dr. 
  To General Reserve a/c 
Always on 31/3 in which all the debentures are redeemed 
25%= 
100% 
 
25%= 
100% 
? Entry is always on the date of redemption 
? Entry is passed only when the process of redemption ends  
For example – S ld . issues 1,000 10% debentures of Rs.100 and redeems them in lumpsum then this entry will be 
of 25% of Rs. 1,00,000 = Rs.25000 on the date redemption  
- R ld . issues 1,000 10% debentures of Rs.100 and redeems 400 debentures then this entry will not be passed as 
all the debnetures had not been redeemed  
? If no information is available then it is assumed debentures are redeemed – 25% out of profits. 
? If debentures are to be redeemed fully out of profits - Entry should be passed with 100% of the amount of the 
debentures which were issued 
 
Case 1. 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The 
issue was fully subscribed. The Board of Directors decided to transfer the required amount to Debenture Redemption 
Reserve on March 31, 2015. It was decided to invest 15% of the face value of debentures to be redeemed towards 
Debenture Redemption Investment on 30th April, 2015. Investments were encashed and Debentures were redeemed on 
due date.  
Solution 
Date Particulars L.F. DR. CR. 
30/6/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
30/6/11 6% Debenture Application & allotment a/c                            Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
31/3/15 Surplus in Statement of Profit & Loss                                      Dr. 
To Debenture Redemption Reserve A/c 
 
2,50,000  
2,50,000 
30/4/15 Debenture Redemption Investment a/c                                  Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
30/6/15 Bank a/c                                                                                        Dr. 
To Debenture Redemption Investment a/c    
 
1,50,000 
 
 
1,50,000 
30/6/15 6% Debentures a/c                                                                      Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
30/6/15 Debenture holder's a/c                                                                Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
30/6/15 Debenture Redemption Reserve A/c                                       Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
       Case 2 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were 
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture 
 
     
 
Redemption Reserve on March 31, 2014. It was decided to invest 15% of the face value of debentures to be redeemed 
towards 10% Debenture Redemption Investment (govt. securities) on 30th April in the year in which the debentures were 
to be redeemed. Investments were encashed and Debentures were redeemed on due date.  
Solution  
Date Particulars L.F. DR. CR. 
1/4/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
1/4/11 6% Debenture Application & allotment a/c                           Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
30/4/14 Debenture Redemption Investment a/c                                Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
31/3/15 Bank a/c                                                                                      Dr. 
To Debenture Redemption Investment a/c    
To interest a/c (earned for 11 months) 
 
1,53,750 
 
 
1,50,000 
  1,3750 
31/3/15 Surplus in Statement of Profit & Loss                                      Dr. 
To Debenture Redemption Reserve A/c 
 
2,50,000  
2,50,000 
31/3/15 6% Debentures a/c                                                                      Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
31/3/15 Debenture holder's a/c                                                              Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
31/3/15 Debenture Redemption Reserve A/c                                      Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
Case 3 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the debentures were 
redeemable on 31st March, 2015. The Board of Directors decided to transfer the required amount to Debenture 
Redemption Reserve on March 31, 2014. It was decided to invest 15% of the face value of debentures to be redeemed 
towards 10% Debenture Redemption Investment (govt. securities) on 30th April in the year in which the debentures were 
to be redeemed and rate to T.D.S paid to the govt. was 20%. Investments were encashed and Debentures were 
redeemed. 
Solution  
Date Particulars L.F. DR. CR. 
1/4/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
1/4/11 6% Debenture Application & allotment a/c                           Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
30/4/14 Debenture Redemption Investment a/c                                 Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
31/3/15 Bank a/c                                                                                        Dr. 
To T.D.S. A/C  
To Debenture Redemption Investment a/c    
To interest a/c (earned for 11 months) 
 
1,51,000 
     2,750 
 
 
 
1,50,000 
  1,3750 
31/3/15 Surplus in Statement of Profit & Loss                                      Dr. 
To Debenture Redemption Reserve A/c 
 
2,50,000  
2,50,000 
31/3/15 6% Debentures a/c                                                                      Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
31/3/15 Debenture holder's a/c                                                              Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
31/3/15 Debenture Redemption Reserve A/c                                       Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
 
Case 4 
Punjab national bank Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on April 1, 2011 and the 
debentures were redeemable on 31st March, 2015. Pass necessary entries for issue and redemption of debentures. How 
much amount of Debenture Redemption Reserve is to be created before redemption of debentures?  
  Solution  
 
     
 
Date Particulars L.F. DR. CR. 
1/4/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
1/4/11 6% Debenture Application & allotment a/c                   Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
31/3/15 6% Debentures a/c                                                                Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
31/3/15 Debenture holder's a/c                                                        Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
? As per Section 17 (4) with rule 18 (7) a Banking Company is not required to create Debenture Redemption 
Reserve 
? A Company which is not required to create DRR is exempted from Investing 15% amount also. 
Case 5 
X Ltd. has 10,000, 6% Debentures of Rs.100 each due for redemption on 31st March 2015. Assume that Debenture 
Redemption Reserve has a balance of Rs.1,50,000 on that date. It was decided to invest the required amount towards 
Debenture Redemption Investment. 
Solution 
Date Particulars L.F. DR. CR. 
30/4/14 Debenture Redemption Investment a/c                       Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
30/4/15 Bank a/c                                                                              Dr. 
To Debenture Redemption Investment a/c    
 
1,50,000 
 
 
1,50,000 
31/3/15 Surplus in Statement of Profit & Loss                            Dr. 
To Debenture Redemption Reserve A/c 
 
1,00,000  
1,00,000 
30/6/15 6% Debentures a/c                                                            Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
30/6/15 Debenture holder's a/c                                                    Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
31/3/15 Debenture Redemption Reserve A/c                            Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
Case 6 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 of which half of the amount is due 
for redemption on June 30,2015. The Board of Directors decided to transfer the required amount to Debenture 
Redemption Reserve on March 31, 2015. Record the necessary entries. 
Solution  
Date Particulars L.F. DR. CR. 
31/3/15 Surplus in Statement of Profit & Loss                           Dr. 
To Debenture Redemption Reserve A/c 
 
2,50,000  
2,50,000 
30/4/15 Debenture Redemption Investment a/c                      Dr. 
 To bank a/c 
 
75,000  
75,000 
30/6/15 Bank a/c                                                                             Dr. 
To Debenture Redemption Investment a/c    
 
75,000 
 
 
75,000 
30/6/15 6% Debentures a/c                                                          Dr. 
   To Debenture holder's a/c 
 
5,00,000 
 
 
5,00,000 
30/6/15 Debenture holder's a/c                                                  Dr.   
     To bank a/c 
 
5,00,000  
5,00,000 
? As all the debentures have not been redeemed so the last entry is not passed. 
? Investments are purchased of the value of the debentures which are to be redeemed.  
Case 7 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 of which half of the amount is due 
for redemption on June 30,2015. The Board of Directors decided to transfer the required amount to Debenture 
Redemption Reserve on March 31, 2015. The company has in its Debenture Redemption Reserve Account a balance of 
Rs.40,000. Record the necessary entries. 
Solution  
Date Particulars L.F. DR. CR. 
31/3/15 Surplus in Statement of Profit & Loss                           Dr.  2,10,000  
 
     
 
To Debenture Redemption Reserve A/c 2,10,000 
30/4/15 Debenture Redemption Investment a/c                      Dr. 
 To bank a/c 
 
75,000  
75,000 
30/6/15 Bank a/c                                                                              Dr. 
To Debenture Redemption Investment a/c    
 
75,000 
 
 
75,000 
30/6/15 6% Debentures a/c                                                           Dr. 
   To Debenture holder's a/c 
 
5,00,000 
 
 
5,00,000 
30/6/15 Debenture holder's a/c                                                   Dr.   
     To bank a/c 
 
5,00,000  
5,00,000 
? As all the debentures have not been redeemed so the last entry is not passed. 
? Investments are purchased of the value of the debentures which are to be redeemed.  
Case 8 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The 
issue was fully subscribed. The Board of Directors decided to redeem these debentures fully out of profits. It was decided 
to invest 15% of the face value of debentures to be redeemed towards Debenture Redemption Investment on 30th April, 
2015. Investments were encashed and Debentures were redeemed on due date. 
Solution   
Date Particulars L.F. DR. CR. 
30/6/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
30/6/11 6% Debenture Application & allotment a/c                            Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
31/3/15 Surplus in Statement of Profit & Loss                                    Dr. 
To Debenture Redemption Reserve A/c 
 
10,00,000 
 
 
10,00,000 
30/4/15 Debenture Redemption Investment a/c                                 Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
30/6/15 Bank a/c                                                                                      Dr. 
To Debenture Redemption Investment a/c    
 
1,50,000 
 
 
1,50,000 
30/6/15 6% Debentures a/c                                                                      Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
30/6/15 Debenture holder's a/c                                                                Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
30/6/15 Debenture Redemption Reserve A/c                                      Dr. 
To General Reserve a/c  
 
10,00,000 
 
 
10,00,000 
Case 9 
X Ltd. redeemed Rs.10,00,000, 6% debentures at a premium of 5% out of profits on 30-6-2015. The company had a 
Debenture Redemption Reserve of Rs.1,50,000. Assuming that the Company has the required balance in Debenture 
Redemption Investment Account, pass necessary journal entries for the redemption of debentures. 
Solution   
Date Particulars L.F. DR CR. 
31/3/15 Surplus in Statement of Profit & Loss                           Dr. 
To Debenture Redemption Reserve A/c 
 
1,00,000  
1,00,000 
30/4/15 Debenture Redemption Investment a/c                      Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
30/6/15 Bank a/c                                                                             Dr. 
To Debenture Redemption Investment a/c    
 
1,50,000 
 
 
1,50,000 
30/6/15 6% Debentures a/c                                                          Dr. 
Premium on redemption a/c                                         Dr. 
   To Debenture holder's a/c 
 
10,00,000 
50,000 
 
 
 
10,50,000 
30/6/15 Debenture holder's a/c                                                  Dr.   
     To bank a/c 
 
10,50,000  
10,50,000 
30/6/15 Debenture Redemption Reserve A/c                           Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
Case 10 
X Ltd. Had a balance of Rs.12,00,000 in its Statement of Profit & Loss a/c . instead of declaring a dividend the co. 
redeemed Rs.10,00,000, 6% debentures at a premium of 5% out of profits on 31-3-2015. The company had a Debenture 
 
     
 
Redemption Reserve of Rs.1,50,000. Assuming that the Company has the required balance in Debenture Redemption 
Investment Account, pass necessary journal entries for the redemption of debentures. 
Date Particulars L.F. DR. CR. 
30/4/14 Debenture Redemption Investment a/c                       Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
31/3/15 Bank a/c                                                                             Dr. 
To Debenture Redemption Investment a/c    
 
1,50,000 
 
 
1,50,000 
31/3/15 Surplus in Statement of Profit & Loss                           Dr. 
To Debenture Redemption Reserve A/c 
 
8,50,000  
8,50,000 
31/3/15 6% Debentures a/c                                                            Dr. 
Premium on redemption a/c                                           Dr. 
   To Debenture holder's a/c 
 
10,00,000 
50,000 
 
 
 
10,50,000 
31/3/15 Debenture holder's a/c                                                   Dr.   
     To bank a/c 
 
10,50,000  
10,50,000 
31/3/15 Debenture Redemption Reserve A/c                          Dr. 
To General Reserve a/c  
 
10,00,000  
10,00,000 
Case 11 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The 
Company decided to transfer out of profits Rs.50,000 to Debenture Redemption Reserve on 31st March, 2014 and 
Rs.1,00,000 on 31st March, 2015. 
Date Particulars L.F. DR. CR. 
30/6/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
30/6/11 6% Debenture Application & allotment a/c                            Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
31/3/14 Surplus in Statement of Profit & Loss                                    Dr. 
To Debenture Redemption Reserve A/c 
 
50,000  
50,000 
31/3/15 Surplus in Statement of Profit & Loss                                    Dr. 
To Debenture Redemption Reserve A/c 
 
1,00,000  
1,00,000 
30/4/15 Debenture Redemption Investment a/c                                  Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
30/6/15 Bank a/c                                                                                      Dr. 
To Debenture Redemption Investment a/c    
 
1,50,000 
 
 
1,50,000 
30/6/15 6% Debentures a/c                                                                      Dr. 
   To Debenture holder's a/c 
 
10,00,000 
 
 
10,00,000 
30/6/15 Debenture holder's a/c                                                                Dr.   
     To bank a/c 
 
10,00,000  
10,00,000 
31/3/15 Debenture Redemption Reserve A/c                                   Dr. 
To General Reserve a/c  
 
2,50,000  
2,50,000 
Case 12 
X Ltd. issued 10,000 6% Debentures of 100 each at a premium of 5% on June 30, 2011 redeemable on June 30,2015. The 
Board of Directors decided to transfer the required amount to Debenture Redemption Reserve in two equal annual 
instalments starting with March 31, 2014. 
Date Particulars L.F. DR. CR. 
30/6/11 Bank A/c                                                                                 Dr. 
To 6% Debenture Application & allotment a/c 
 
10,50,000 
 
 
10,50,000 
30/6/11 6% Debenture Application & allotment a/c                            Dr. 
 To 6% Debentures a/c 
 To Securities Premium Reserve a/c 
 
10,50,000  
10,00,000 
50,000 
31/3/14 Surplus in Statement of Profit & Loss                                    Dr. 
To Debenture Redemption Reserve A/c 
 
1,25,000  
1,25,000 
31/3/15 Surplus in Statement of Profit & Loss                                    Dr. 
To Debenture Redemption Reserve A/c 
 
1,25,000  
1,25,000 
30/4/15 Debenture Redemption Investment a/c                                 Dr. 
 To bank a/c 
 
1,50,000  
1,50,000 
30/6/15 Bank a/c                                                                                      Dr.  1,50,000  
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FAQs on Cases - Redemption of Debentures - Crash Course of Accountancy - Class 12 - Commerce

1. What is the meaning of redemption of debentures?
Ans. The redemption of debentures refers to the process of repaying or returning the debentures issued by a company to its debenture holders. It is a way for the company to fulfill its financial obligations and remove the debt from its books.
2. How does a company redeem its debentures?
Ans. A company can redeem its debentures either through the payment of the principal amount on maturity or by purchasing them from the open market. The company must follow the terms and conditions stated in the debenture agreement and comply with the relevant legal requirements.
3. What are the methods of redemption of debentures?
Ans. There are three common methods of redeeming debentures: 1. Lump sum redemption: The company repays the entire principal amount along with any accrued interest in one installment on the date of maturity. 2. Installment redemption: The company repays the principal amount in installments over a predetermined period. Each installment may include a portion of the principal and the applicable interest. 3. Conversion into shares: The company may offer the debenture holders the option to convert their debentures into shares of the company at a predetermined conversion ratio.
4. What are the advantages of redeeming debentures?
Ans. The advantages of redeeming debentures include: 1. Reduction of financial burden: Redeeming debentures helps the company reduce its outstanding debt, which can improve its financial position and creditworthiness. 2. Cost savings: By redeeming debentures, the company can save on interest payments that would otherwise be due on the debentures. 3. Enhanced investor confidence: Timely redemption of debentures enhances investor confidence in the company's ability to fulfill its financial obligations, leading to a positive reputation and potential access to future funding.
5. Are there any legal requirements for the redemption of debentures?
Ans. Yes, there are legal requirements that must be followed for the redemption of debentures. These include compliance with the provisions of the Companies Act or any other relevant legislation governing the issuance and redemption of debentures. The company must also adhere to the terms and conditions mentioned in the debenture agreement, such as providing notice to debenture holders, maintaining a sinking fund, and obtaining necessary approvals from regulatory authorities if required.
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