Question

What entries for the redemption of debentures will be done when : (a) debentures are redeemed by annual drawings out of profits; (b) debentures are redeemed by drawing a lot out of capital; and (c) debentures are redeemed by purchasing them in the open market when sinking fund for the redemption of debentures is not maintained − (i) when out of profit, and (ii) when out of capital?

Answer 1

S.No.	Particulars					L.F.	Debit Amount Rs	Credit Amount Rs
(a)	Profit and Loss Appropriation A/c				Dr.
			To Debentures Redemption Reserve A/c
	(Profit transferred to Debentures Redemption Reserve)
	Debenture A/c				Dr.
			To Debenture Holders
	(Amount due of debentures to Debenture Holders)
	Debenture Holders				Dr.
			To Bank A/c
	(Amount of debentures paid to Debenture Holders)
	Debentures Redemption Reserve A/c				Dr.
		To General Reserve A/c
	(Amount of Debentures Redemption Reserve transferred to General Reserve)
(b)	Debenture A/c				Dr.
			To Debenture Holders A/c
	(Amount of debentures due to Debenture Holders)
	Debenture Holders				Dr.
			To Bank
	(Amount of debentures paid to Debenture Holders)
(c) (i)	Profit and Loss Appropriation A/c				Dr.
			To Debenture Redemption Reserve A/c
	(Transfer of Profit to Debenture Redemption Reserve)
	Own Debentures A/c				Dr.
			To Bank A/c
	(Own debentures purchased from open market)
	Debenture A/c				Dr.
			To Own Debentures A/c
	(Own debentures cancelled)
(ii)	Own Debenture A/c				Dr.
			To Bank A/c
	(Own debentures purchased from open market)
	Debenture A/c				Dr.
			To Own Debenture A/c
	(Own debentures cancelled)