Commerce Exam > Commerce Notes > Crash Course of Accountancy - Class 12 > Cases - Redemption of Debentures
Cases - Redemption of Debentures | Crash Course of Accountancy - Class 12 - Commerce PDF Download
| Download, print and study this document offline |
Please wait while the PDF view is loading
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
Read More
|
79 docs|41 tests
|
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.
Related Exams
About this Document
|
4.73/5 Rating |
|
Dec 25, 2024 Last updated |
Document Description: Cases - Redemption of Debentures for Commerce 2024 is part of Crash Course of Accountancy - Class 12 preparation.
The notes and questions for Cases - Redemption of Debentures have been prepared according to the Commerce exam syllabus. Information about Cases - Redemption of Debentures covers topics
like and Cases - Redemption of Debentures Example, for Commerce 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises and tests below for Cases - Redemption of Debentures.
Introduction of Cases - Redemption of Debentures in English is available as part of our Crash Course of Accountancy - Class 12
for Commerce & Cases - Redemption of Debentures in Hindi for Crash Course of Accountancy - Class 12 course.
Download more important topics related with notes, lectures and mock test series for Commerce
Exam by signing up for free. Commerce: Cases - Redemption of Debentures | Crash Course of Accountancy - Class 12 - Commerce
Description
Full syllabus notes, lecture & questions for Cases - Redemption of Debentures | Crash Course of Accountancy - Class 12 - Commerce - Commerce | Plus excerises question with solution to help you revise complete syllabus for Crash Course of Accountancy - Class 12 | Best notes, free PDF download
Information about Cases - Redemption of Debentures
In this doc you can find the meaning of Cases - Redemption of Debentures defined & explained in the simplest way possible. Besides explaining types of
Cases - Redemption of Debentures theory, EduRev gives you an ample number of questions to practice Cases - Redemption of Debentures tests, examples and also practice Commerce
tests
|
Explore Courses for Commerce exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
Related Searches
Cases - Redemption of Debentures | Crash Course of Accountancy - Class 12 - Commerce
,Summary
,mock tests for examination
,shortcuts and tricks
,Cases - Redemption of Debentures | Crash Course of Accountancy - Class 12 - Commerce
,Sample Paper
,ppt
,study material
,Free
,Cases - Redemption of Debentures | Crash Course of Accountancy - Class 12 - Commerce
,video lectures
,Exam
,Previous Year Questions with Solutions
,past year papers
,practice quizzes
,Viva Questions
,Semester Notes
,Objective type Questions
,Important questions
,MCQs
,Extra Questions
;
Additional Information about Cases - Redemption of Debentures for Commerce Preparation
Cases - Redemption of Debentures Free PDF Download
The Cases - Redemption of Debentures is an invaluable resource that delves deep into the core of the Commerce exam.
These study notes are curated by experts and cover all the essential topics and concepts, making your preparation more efficient and effective.
With the help of these notes, you can grasp complex subjects quickly, revise important points easily,
and reinforce your understanding of key concepts. The study notes are presented in a concise and easy-to-understand manner,
allowing you to optimize your learning process. Whether you're looking for best-recommended books, sample papers, study material,
or toppers' notes, this PDF has got you covered. Download the Cases - Redemption of Debentures now and kickstart your journey towards success in the Commerce exam.
Importance of Cases - Redemption of Debentures
The importance of Cases - Redemption of Debentures cannot be overstated, especially for Commerce aspirants.
This document holds the key to success in the Commerce exam.
It offers a detailed understanding of the concept, providing invaluable insights into the topic.
By knowing the concepts well in advance, students can plan their preparation effectively.
Utilize this indispensable guide for a well-rounded preparation and achieve your desired results.
Cases - Redemption of Debentures Notes
Cases - Redemption of Debentures Notes offer in-depth insights into the specific topic to help you master it with ease.
This comprehensive document covers all aspects related to Cases - Redemption of Debentures.
It includes detailed information about the exam syllabus, recommended books, and study materials for a well-rounded preparation.
Practice papers and question papers enable you to assess your progress effectively.
Additionally, the paper analysis provides valuable tips for tackling the exam strategically.
Access to Toppers' notes gives you an edge in understanding complex concepts.
Whether you're a beginner or aiming for advanced proficiency, Cases - Redemption of Debentures Notes on EduRev are your ultimate resource for success.
Cases - Redemption of Debentures Commerce Questions
The "Cases - Redemption of Debentures Commerce Questions" guide is a valuable resource for all aspiring students preparing for the
Commerce exam. It focuses on providing a wide range of practice questions to help students gauge
their understanding of the exam topics. These questions cover the entire syllabus, ensuring comprehensive preparation.
The guide includes previous years' question papers for students to familiarize themselves with the exam's format and difficulty level.
Additionally, it offers subject-specific question banks, allowing students to focus on weak areas and improve their performance.
Study Cases - Redemption of Debentures on the App
Students of Commerce can study Cases - Redemption of Debentures alongwith tests & analysis from the EduRev app,
which will help them while preparing for their exam. Apart from the Cases - Redemption of Debentures,
students can also utilize the EduRev App for other study materials such as previous year question papers, syllabus, important questions, etc.
The EduRev App will make your learning easier as you can access it from anywhere you want.
The content of Cases - Redemption of Debentures is prepared as per the latest Commerce syllabus.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup