Question

A.Ltd. purchased its own debentures of the face value of Rs.2,00,000 from the open market for immediate cancellation at Rs.92. Record the journal entries.

Answer 1

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★ When debentures are redeemed out of profit, it is essential that an equal amount to the face value of the debentures redeemed will be transferred to Debenture Redemption Reserve Account.

★ When all the debentures are redeemed, the Debenture Redemption Reserve Account is closed by transferring to General Reserve Account.

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