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Redemption of Debenture (Draw of Lots Method) Video Lecture | Principles and Practice of Accounting - CA Foundation

68 videos|160 docs|83 tests

FAQs on Redemption of Debenture (Draw of Lots Method) Video Lecture - Principles and Practice of Accounting - CA Foundation

1. What is the redemption of debenture?
Ans. The redemption of debenture refers to the process of repaying the principal amount of the debentures to the debenture holders by the company. It is a way for the company to fulfill its financial obligation towards the debenture holders.
2. What is the draw of lots method in the redemption of debenture?
Ans. The draw of lots method is a mechanism used by companies to select the debenture holders for redemption when the number of debentures exceeds the number that the company intends to redeem. In this method, a lottery-type system is employed to randomly select the debenture holders who will receive the redemption amount.
3. How does the draw of lots method work in the redemption of debenture?
Ans. In the draw of lots method, the company assigns a unique identification number to each debenture. These numbers are then put into a lottery box, and a random number generator or a manual draw is used to select the numbers corresponding to the debentures that will be redeemed. The holders of the selected debentures are then paid the redemption amount.
4. Why is the draw of lots method used in the redemption of debenture?
Ans. The draw of lots method is used in the redemption of debenture to ensure fairness and transparency in selecting the debenture holders for redemption. It eliminates any bias or favoritism by randomly selecting the debenture holders, giving everyone an equal chance of being redeemed.
5. What are the advantages of using the draw of lots method in the redemption of debenture?
Ans. The draw of lots method has several advantages in the redemption of debenture. It ensures fairness in the selection process, provides equal opportunity to all debenture holders, minimizes disputes and conflicts, and enhances the credibility of the company. Additionally, it is a transparent method that can be easily audited and verified.
68 videos|160 docs|83 tests
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