GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Profits
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Capital
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Provisions made for redemption
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All of the above
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Detailed explanation-1: -Money from the sale of fixed assets. Company’s profits. Company’s partial capital or small share of the capital. Conversion of debentures into shares. Funds from new debenture issuing. More items
Detailed explanation-2: -Profit on redemption of debentures is a capital profit. It is used to write-off discount on issue of debentures/shares; otherwise it will be transferred to capital reserve. Debentures may be redeemed out of capital or out of profits.
Detailed explanation-3: -This debenture redemption reserve is a capital reserve account. It is funded by the divisible profits of each year, i.e. a portion of the profits are set aside for this purpose. This account can only be utilized for the purpose of redemption of debentures and for no other purpose.
Detailed explanation-4: -A debenture redemption reserve (DRR) is a provision stating that any Indian corporation that issues debentures must create a debenture redemption service in an effort to protect investors from the possibility of a company defaulting.
Detailed explanation-5: -The various methods of Redeeming Debentures are payment in lump-sum, payment in instalments, conversion of debentures and purchase of debentures in the market.