Issue and redemption of debentures important questions for cbse class 12 accountancy redemption of debentures. Ts grewal accountancy class 12 solutions chapter 10. Introduction a debenture is an instrument issued by a company under its seal, acknowledging a debt and containing provisions as regards repayment of the principal and interest. Buybackcall provision buyback provision enable the company to redeem debentures at a specific price before the maturity date. Debentures, in accordance with the terms of the trust indenture dated august 10, 2015, governing these debentures. Let us learn more about the various methods of redemption of debentures and their accounting treatments. When a company wishes to raise capital but does not want to dilute their equity they issue debentures. Hence when their period expires, debenture holders are paid back their principal amount.
Debentures provide higher rates of financial return and are usually much more rewarding than government bonds or bank investments at the end of the lending period, issuing companies usually offer the choice of converting the debentures for shares stock or equity. Ts grewal accountancy class 12 solutions chapter 10 redemption of debentures. The company met the requirements of companies act, 20 regarding debentures redemption reserve and debentures redemption investments and redeemed the debentures. Give journal entries at the time of issue and redemption of debentures if debentures are to be redeemed in lump sum at the end of 4th year. Sinking fund method of redemption of debenture accounting. A debenture is a type of debt instrument that is not secured by physical assets or collateral. The debenture redemption reserve is part of the total reserves of the company making up the shareholders funds. When debentures are redeemed, liability on account of debentures is discharged. In this article we will discuss about the redemption of debentures. Debentures 3 make entries for issue of debentures considering the conditions of redemption pass entries for issue of debentures as collateral security pass entries for debentures issued for consideration other than for cash write off discount on issue of debentures. Traditionally, the government issued bonds, but these days, bonds are also being issued by semigovernment and nongovernmental organisations.
Redeemable debentures carry a specific date of redemption on the certificate. Methods of redemption of debentures accounts class 12. Redemption of debentures sinking fund method by cacma. Redemption of debentures company is empowered as from 31st march, 2008 to purchase its own debentures on the open market. Students can solve ncert class 12 accountancy redemption of debentures mcqs pdf with answers to know their preparation level.
The word debenture translates to a written instrument as debt. Introduction, issue of debentures and various cases from the point of view of redemption 1. Company accounts redemption of debentures class 12 notes. The amount credited to the drr shall not be utilized by the company except for the redemption of debenture. Ts grewal solutions for class 12 accountancy chapter 10. Ts grewal solutions for class 12 accountancy company account redemption of debenture volume ii question 1. Every company is required to create a debenture redemption reserve for the purpose of redemption of debentures. The companies act has not laid down any conditions for the redemption of debentures. If there is a case of convertible debentures then the debenture redemption reserve shall be created in respect of non convertible portion of debentures. Grewal solutions, accountancy class 12 redemption of debentures solutions.
Debenture includes debenture stock, bonds or any other securities of a company whether constituting a charge on the asseets of the company or not. Types of debentures basis redemption, convertibility. This process of discharging the companys debt is known as the redemption of debentures. The amount remaining deposited invested shall not at any time fall below 15% of the amount of debentures maturing during that year ending 31st march in case of partly convertible debentures, drr to be created for nonconvertible portion. Profit on sale of debenture redemption fund investments in the first instance is credited to. This certificate is issued beneath the corporate seal. Download redemption of debenture notes file in pdf format.
Issue and redemption of debentures cbse notes for class 12 accountancy cbse notescbse notes accountancyncert solutions accountancy topic 1. A sinking fund may be defined as a fund, created by a charge against or an appropriation of profits represented by specific investments, which is brought into existence for a specific purpose, such as replacement of an asset at the expiration of its life or the redemption of debentures. They are a certificate of debt, with the date of redemption and quantity of reimbursement mentioned on that. Important questions for redemption of debentures ts grewal solutions for class 12 accountancy chapter 10 redemption of debentures. According to section 744 of the companys act, 20 and rule 187 of the companies share capital and debentures rules, 2014, a company is required to transfer an amount equal to at least 25% of the value of debentures to the debenture redemption reserve ac before redemption of debentures. As per the companies act, interest accrued and due on debentures should be shown under debentures. The methods of redemption of debentures and, meaning of redemption of debentures are explained below. As the debenture capital is borrowed capital it has to be paid back. Redemption of debentures methods of redemption of debentures. Which of the following is true with regard to 10% debentures issued at a discount of 20%.
Reason for ignoring a problem problem question numbers being ignored. When the company which has issued debentures and borrowed money from such issue, repays the owner of such debentures, it is called the redemption of debentures. The ts grewal solutions to the questions after every unit of ts grewal textbooks aimed at helping students solving difficult questions. The amount which is credited to the debenture redemption reserve must not be utilised by the company itself except for the purpose of redemption of debentures. Following are the various types of debentures visavis their basis of classification. The amount which is credited to the debenture redemption reserve must not be utilised by the company itself. At least 50% of the debenture issue must be transfer to drr before redemption commence. Mcq on issue and redemption of debentures facebook. A debenture redemption reserve is a provision that was added to the indian companies act of 1956 during an amendment in the year 2000. If in any year the nominal amount of the stock surrendered under this.
Specimen presentation of debenture certificates for. The best app for cbse students now provides accounting for partnership firms fundamentals class 12 notes latest chapter wise notes for quick preparation of cbse board exams and schoolbased annual examinations. Drr is a reserve created out of profits for redeeming debentures. Debentures are backed only by the general creditworthiness and reputation of the issuer. An practical example solved for better understanding and further explained in details the of role of debenture redemption reserve in redemption of debentures. Debentures are instruments of debt, which suggests that debenture holders become creditors of the corporation. A study on issue and problems on redemption of debentures.
Share capital and debentures 3 declared dividend to its shareholders or repayment of its matured deposits or redemption of its preference shares or debentures that have become due for redemption or payment of interest on such deposits or debentures or payment of dividend. The company is legally bound to repay the principal amount to the debenture holders on. Accountancy mcqs for class 12 with answers chapter 9. These debentures must be surrendered to the trustees for cancellation and any adjustments for accrued interest recorded in the books of account. The carrying amount of debentures gets reduced each year at a rate. Accounting redemption of debentures summary notes 2018. The money so parked can be utilized only for the purpose of redemption of debentures. Company accounts redemption of debentures class 12 notes accountancy in pdf are available for free download in mycbseguide mobile app.
Meaning of debenture it means a document of companies indebtedness issued under the seal of the company and containing a. Free pdf download of cbse accountancy multiple choice questions for class 12 with answers chapter 9 redemption of debentures. The issue price and redemption value of debentures cannot differ. The repayment of debenture amount to debenture holder is called as redemption of debentures. The provisions of the companies act, 20 in respect of redemption of debentures are to protect the interest of. Redemption reserve and its investment is termed as debenture redemption reserve investment. Issue and redemption of debentures cbse notes for class. Redemption of debentures can be accomplished either through, sinking fund it is a cash set aside perodically for retiring debentures. Let us see the types of debentures issued, terms of issue, the redemption of debentures and the accounting treatment for the same. Debentures x a company may issue debentures with an option to convert such debentures into shares, either wholly or partly at the time of redemption. Guru, you can access to ts grewal book solutions in free pdf for accountancy for class 12 so that you can refer them as and when required. Redemption of debentures means repayment of the due amount of debentures to the debenture holders. Ignoring interest on investments, pass necessary journal entries for the above transactions in the books of company. In the last year or at the time of redemption of debentures, debenture redemption reserve investments are encashed and the amount so obtained is used for the redemption of debentures.
Redeemable debentures redeemable debentures are redeemed after the expiry of certain agreed period in one lump sum or in installments over a period or at the option of the company. Amount of funds required for redemption of debentures is quite large and, therefore, prudent companies make sufficient provision out of. Accountancy mcqs for class 12 chapter wise with answers pdf download was prepared based on latest exam pattern. Second debentures second debentures are those which are paid after the redemption of first debentures. Ts grewal solutions for class 12 accountancy cbse tuts. Redemption of debentures redemption of debentures means discharging the liability on account of debentures in accordance with the terms and conditions.
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