Question

When debentures are redeemed out of profit an equal amount is transfer to?

Answer 1

heya mate!!

Redemption of Debentures out of Profits: Redemption of debenture out of profits implies that an amount equal to the face value of the debentures redeemed is transferred to DRR. Thus, a part of the profits of company are withheld from distribution to shareholders.

Hope it helps u dear✌️✌️

Answer 2

DEBENTURE REDEMPTION RESERVE

When debentures are redeemed out of profit an equal amount is transfered to DEBENTURE REDEMPTION RESERVE.

GETTING TO KNOW MORE ABOUT DEBENTURE REDEMPTION RESERVE:

* Companies that issue debentures in India are required to keep a Debenture Redemption Reserve (DRR). This initiative is intended to shield investors from the prospect of a corporation failing on its obligations.

* DRR also guarantees that sufficient money are available to satisfy debenture holders' obligations. Furthermore, the corporation will only utilise the cash in DRR to redeem debentures.

* A Debenture Redemption Reserve is made up of two parts (DRR). The first step is to set away some of the company's profits. The method of allocating the profit follows next. This is referred to as "money earmarking." This guarantees that sufficient profits are available for debt repayment.