Question

Debenture purchase in open market operations

Answer 1

amswer is : 1)Since profit on redemption of debentures is a Capital Profit, the same should be transferred to Capital Reserve Account, if there is no Sinking Fund. But, if there is Sinking Fund, the said profit should be transferred to Sinking Fund Account. On the contrary, the loss on redemption of debentures is a capital loss, and, hence, should be adjusted against either Capital Profit or Securities Premium Account.

2. An amount equal to the nominal value of the debentures cancelled should be transferred to General Reserve out of profits.