PPT - Issue and Redemption of Debentures - Notes | Study Accountancy Class 12 - Commerce

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Company Accounts 
Company Accounts 
(Redemption of Debentures
(Redemption of Debentures
Page 2


1 1
Company Accounts 
Company Accounts 
(Redemption of Debentures
(Redemption of Debentures
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Meaning
             Redemption of Debentures means 
repayment of the amount of debentures to the 
debenture holders or discharge of the liability 
on account of debentures.
             A company is authorised by its 
Articles of Association and the terms of issue 
and redeem the debentures before the due date 
in prospectus.
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1 1
Company Accounts 
Company Accounts 
(Redemption of Debentures
(Redemption of Debentures
2
Meaning
             Redemption of Debentures means 
repayment of the amount of debentures to the 
debenture holders or discharge of the liability 
on account of debentures.
             A company is authorised by its 
Articles of Association and the terms of issue 
and redeem the debentures before the due date 
in prospectus.
 
 
The following are the conditions at the time of 
Redemption of Debentures
1.Time: Debentures are normally redeemed on the 
due date.  At what time money will be paid back? 
First one is  Lumpsum on a specific date and second 
one in  installments
2.Amount: How much money paid. The debentures 
can be issued at par, premium and discount in the 
same way debentures can be redeemed at par or a 
premium but debentures cannot be redeemed at 
discount.
3. Mode
4.Source
3 3
Conditions
Page 4


1 1
Company Accounts 
Company Accounts 
(Redemption of Debentures
(Redemption of Debentures
2
Meaning
             Redemption of Debentures means 
repayment of the amount of debentures to the 
debenture holders or discharge of the liability 
on account of debentures.
             A company is authorised by its 
Articles of Association and the terms of issue 
and redeem the debentures before the due date 
in prospectus.
 
 
The following are the conditions at the time of 
Redemption of Debentures
1.Time: Debentures are normally redeemed on the 
due date.  At what time money will be paid back? 
First one is  Lumpsum on a specific date and second 
one in  installments
2.Amount: How much money paid. The debentures 
can be issued at par, premium and discount in the 
same way debentures can be redeemed at par or a 
premium but debentures cannot be redeemed at 
discount.
3. Mode
4.Source
3 3
Conditions
4 4
3. Mode: How the company will pay -    by 
way of Cash  through cheque on a due date or  
by way of kind issuing equity shares of a 
company on maturity date.
4. Source: Debentures can be redeemed out of 
Capital or Profits. If the debentures are 
redeemed out of capital means no effect on 
profits.  It will reduce cash and liability only.   
If the debentures are redeemed out of profit 
means the same amount will be appropriated 
out of profits of a company. 
Page 5


1 1
Company Accounts 
Company Accounts 
(Redemption of Debentures
(Redemption of Debentures
2
Meaning
             Redemption of Debentures means 
repayment of the amount of debentures to the 
debenture holders or discharge of the liability 
on account of debentures.
             A company is authorised by its 
Articles of Association and the terms of issue 
and redeem the debentures before the due date 
in prospectus.
 
 
The following are the conditions at the time of 
Redemption of Debentures
1.Time: Debentures are normally redeemed on the 
due date.  At what time money will be paid back? 
First one is  Lumpsum on a specific date and second 
one in  installments
2.Amount: How much money paid. The debentures 
can be issued at par, premium and discount in the 
same way debentures can be redeemed at par or a 
premium but debentures cannot be redeemed at 
discount.
3. Mode
4.Source
3 3
Conditions
4 4
3. Mode: How the company will pay -    by 
way of Cash  through cheque on a due date or  
by way of kind issuing equity shares of a 
company on maturity date.
4. Source: Debentures can be redeemed out of 
Capital or Profits. If the debentures are 
redeemed out of capital means no effect on 
profits.  It will reduce cash and liability only.   
If the debentures are redeemed out of profit 
means the same amount will be appropriated 
out of profits of a company. 5
Debenture Redemption Reserve
Debenture Redemption Reserve
       For Redemption best source is out of profits.  
There is an Institution called Securities Exchange 
Board of India. This body was exercising and 
controlling on this point.  It has told the company that 
you have to redeem the debentures only out of 
profits.
 
      One more thing that u must keep minimum 50% 
of amount which u have to redeem in a special 
account called Debenture Redemption Reserve.  This 
was what SEBI has directed before 2013 Companies 
Act.