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Question
When the owners debentures are cancelled any profit on cancellation is transferred to __________.
When the owners debentures are cancelled any profit on cancellation is transferred to __________.
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Solution
The correct option is A Capital reserve
When own debenture are purchased by the company from the open market, these can be purchased for two reasons, either for cancellation or for investments. Profit on account of cancellation of debenture is a capital profit and should be transferred to capital reserve account.
When own debenture are purchased by the company from the open market, these can be purchased for two reasons, either for cancellation or for investments. Profit on account of cancellation of debenture is a capital profit and should be transferred to capital reserve account.
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