When investment in own debentures is cancelled the profit on cancellation is credited to ___________________.

Sinking fund account

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Debenture Redemption reserve account

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Capital reserve account

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Any of the above

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Solution

The correct option is B Debenture Redemption reserve account
When investment in own debenture is cancelled the profit on cancellation is credited to - Debenture Redumption Reserve Account.Because working capital of tge company is adversely affected, it is desirable that the amount equal to the nominal value of the debenture cancelled should be transferred to the debenture redemption reserve a/c out of the profit of the company.
This will help in maintaing the working capital of the company by noy paying as dividend as part of the profit set aside.

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Similar questions

Q. After the redemption of debentures, any credit balance in the Sinking Fund A/c is transferred to ______ A/c.

Where a company creates a Debenture Redemption Reserve for the redemption of such debentures, the amount shall be credited, out of its ___every year until such debentures are redeemed.

On January 1,2011, the following balances appeared in the books of Z Ltd

$\begin{matrix} Items & Rs. 6 % Debentures & 1, 00, 000 Debentures Redemption Reserve Fund & 80, 000 Debentures Redemption Reserve Fund Investments & 80, 000 \end{matrix}$

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Q. is a specific reserve that is credited when shares or debentures are issued on a premium.

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