Redemption of Debenture (Lump sum Method) Video Lecture - Accountancy Class

you know whenever we take loan from any
source we have to pay back after some
time able to say we have to repay the
loan
and technically it is called to redeem
the loan in the same way company takes
loan from the public
and they call it the company has issued
debentures
company will have to repay this loan to
the public as per terms and conditions
when the company pays back money to the
debenture holders it means the company
is going to redeem the debentures and
this Redemption word is from redeem
means to pay back so you must know the
meaning of redemption
and all the conditions of redemption and
issue are always shown in the prospectus
so when the applicant applies for the
debentures he knows each and everything
about the terms and conditions about the
issue and redemption of the debentures
so now the question is what should be
the accounting treatment at the time of
redemption
technically a redemption of the benches
depends upon terms T a NS innovates a
new thing for you
T stands for time here stands for amount
and M stands for mode and s stands for
source so first of all I'm going to take
up the first item that is time
means the company must make a clear
enough prospectus
at what time that debentures will be
retained means at what time the money
will be paid back to the debenture
holders
this time depends upon two things either
the debentures will be revealed in lump
sum
on a specific date or that debentures
will be redeemed in installments
for example a company
issues on 4chan by 2010 through
Adventures of 10h and company clearly
states in the Prospectus
that the debentures will be redeemed at
the end of four years I am to say on
31st December 2030 it means companies
going to reveal the debentures in lump
sum
number two amount means
how much money will be paid to the
debenture holders
it may sound via to you you have paid
ten rupees to the company naturally
after five years or seven years you will
get 10 rupees no it's not possible there
are other possibilities also the
Belcher's can be issued at par at
discount bacterium in the same way the
debentures can be redeemed at path for
opinion but the benches cannot be
redeemed at discount be careful
now
I'll discuss about more
Maude Mills
how the company will repair Sloane means
what will be the mood it will be paid in
cash or in kind in cash means on the due
date the company will send checks to the
debenture holders it means they have
paid cash and the second possibility is
that company they'll pay cash complete
mr. Taylor prospectus that on the date
of maturity we are going to pay cash
we'll give you suppose equity shares it
means redemption is not going to be in
cash the mode of redemption is in
conversion into equity shares
and the next point is source company can
redeem the defenses there are two types
of sources the company can redeem the
Dementors either out of capital or out
of profits
in your course we are not going to touch
out of profits it will be discussed in
the next class so we are going to assume
that the debentures will be redeemed out
of capital aft of capitals very simple
thing without disturbing any profits
you