The balance of sinking fund investment account after the realization of investment is transferred to:

Profit and loss account

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Debenture account

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Sinking fund account

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Trading account

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Solution

The correct option is D Sinking fund account
Sufficient funds are required to redeem debentures at the end of a specified period. To meet this requirement, the company may decide to create a sinking fund account. Hence the balance of sinking fund investment account after realization of investment is transferred to sinking fund account.

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Q. The balance in the investments Fluctuation Fund, after meeting the loss on revaluation of investment at the time of admission of a partner will be transferred to _____________ .

On April 01, 2014 a company issued 15% debentures of Rs 10,00,000 at par. The debentures were redeemable at par after three years from the date of Issue. A sinking fund was set up to raise funds for redemption of debentures. The amount for the purpose was invested in 6% Government securities of Rs 100 each available at par. The sinking fund table shows that if investments earn 6% per annum, to get Re.1 at the end of 3 years, one has to invest Rs 0.31411 every year together with interest that will be earned. On March 31, 2017, all the Government securities were sold at a total loss of Rs 6,000 and the debentures were redeemed at par.

Prepare Debentures Account Sinking Fund Account, Sinking Fund Investment Account and Interest on Sinking Fund Investment Company closes its books of accounts every year on March 31.

Which account is to be debited to transfer interest on investment to debenture redemption fund?

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