Question

What do you mean by redemption of debenture by conversion with the help of journal entry?

Answer 1

The debentures may be redeemed by converting them into equity shares as per the terms of their issue. The Companies Act prohibits any non-convertible portion of the debentures to be redeemed by conversion. This implies that the debentures will be redeemed by conversion only if they were issued as such and no cash outflow will take place and hence, there is no requirement of creating Debenture Redemption Reserve. Whenever the debentures are redeemed by conversion, the debenture holders have to apply for the same.


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