Question

The following balances appeared in the books of A.Ltd. on April 01, 2017 Rs 12% Debentures 4,00,000 Debentures Redemption Fund 3,60,000 Debentures Redemption Fund Investment 3,60,000 Securities Premium 30,000 Bank Balance 1,00,000 On April 01, 2017, the company redeemed all the debentures at 105 per cent out of funds raised by selling all the investments at Rs 3,48,000. Prepare the necessary ledger accounts.

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.

Answer 2

Answer:

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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