A debenture redemption reserve is a provision that was added to the indian companies act of 1956 during an amendment in. The terms debentures and bonds ar e now being used inter changeably. The term debenture is more descriptive than definitive. The premium on redemption of debentures account will appear as a distinct.
Know the meaning and functions of debenture trustee. The ts grewal solutions to the questions after every unit of ts grewal textbooks aimed at helping students. 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. Redemption of debentures means payment of the amount of debentures by the company. The company is legally bound to repay the principal amount to the debenture holders on. Accountancy mcqs for class 12 with answers chapter 9. Redemption of debentures sinking fund method by cacma. Ncert solutions for class 12 accountancy part ii chapter 2 issue and redemption of debentures pdf solved by expert mathematics teachers from latest edition books and as per ncert cbse guidelines. Pdf ncert solutions for class 12 accountancy part ii. The issue price and redemption value of debentures cannot differ.
Accounting redemption of debentures summary notes 2018. So the company will discharge its liability and remove it from the balance sheet. Pass necessary journal entries regarding the issue and redemption of debentures, without providing for either the interest or. On the expiry of that specified time the company has the right to pay back the debenture holders and have its properties released from the mortgage or charge. Students can solve ncert class 12 accountancy redemption of debentures mcqs pdf with answers to. Of course, the terms laid down for the redemption of the debentures in the prospectus at the time of issue of the debentures will have to be. Drr is a reserve created out of profits for redeeming debentures. Accountancy mcqs for class 12 chapter wise with answers pdf download was prepared based on latest exam pattern. If there is a case of convertible debentures then the debenture redemption reserve shall be created in respect of non convertible portion of debentures. When debentures are redeemed at par, journal entries are.
It simply states that a debenture includes debenture stock, bonds and any other securities of a company whether constituting a charge on the assets of the company or not sec. Issue and redemption of debentures cbse notes for class. At least 50% of the debenture issue must be transfer to drr before redemption commence. The amount credited to the drr shall not be utilized by the company except for the redemption of debenture. Function of debentures trustee, various way of issue of debentures. Methods of redemption under section 117 of companies act v. Draft a letter of debenture holder informing him about. Redemption of debentures by purchase from open market by. These debentures are issued for a specified period of time. In this unit you will lean1 about various types of debentures that are issued by a company and study the. Buybackcall provision buyback provision enable the company to redeem debentures at a specific price before the maturity date. Debentures 25 b at the time of making allotment i transfer of application money to debenture account.
Meaning of debenture it means a document of companies indebtedness issued under the seal of the company and. As per the companies act, interest accrued and due on debentures should be shown under debentures. 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. Let us see the types of debentures issued, terms of issue, the redemption of debentures and the accounting treatment for the same. Company accounts redemption of debentures class 12 notes accountancy in pdf are available for free download in mycbseguide mobile app. Debentures, in accordance with the terms of the trust indenture dated august 10, 2015, governing these debentures. Redeemable debentures carry a specific date of redemption on the certificate. Thus, the act only states that it is a kind of security which constitutes a charge by way of security on issuing debentures. Accountancy mcqs for class 12 with answers chapter 8 issue.
The debenture redemption reserve is part of the total reserves of the company making up the shareholders funds. Redemption of debentures in lumpsum, means that the debentures are repaid to debenture holders in lumpsum at once or in one go the entire amount is repaid, after a specified period of time, as per the terms of the debentures. Give journal entries at the time of issue and redemption of debentures if debentures are. We hope the ts grewal accountancy class 12 solutions chapter 10 redemption of debentures help you. Company accounts redemption of debentures class 12 notes. 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. Issue and redemption of debentures cbse notes for class 12 accountancy cbse notescbse notes accountancyncert solutions accountancy topic 1. When a company wishes to raise capital but does not want to dilute their equity they issue debentures. The interest paid to them is a charge against profit in the companys financial statements. Intro to convertible debentures the cash payback period is the number of years it takes for the dollar premium to be recovered through the yield pickup of the debenture.
Holders of 4,000 debentures accepted the offer of 8% preference shares, holders of 4,800 debentures accepted the offer of 7% 2nd debenture and the rest demanded cash. This is a major transaction for the company since the amount of money involved tends to be quite significant. A debenture is a type of debt instrument that is not secured by physical assets or collateral. Normally, the amount of shares is not returned during the life of the company, whereas, generally, the debentures are issued for a.
Following are the various types of debentures visavis their basis of classification. Methods of redemption of debentures accounts class 12. Grewal solutions, accountancy class 12 redemption of debentures solutions. Mcq on issue and redemption of debentures cma tutors.
For the purpose of redemption of debentures the company has the right to create debenture redemption reserve account. Bond is also an instrument of acknowledgement of debt. The companies act, 1956 has not defined as to what debenture means. Give journal entries recording the above redemption. Types of debentures basis redemption, convertibility. Appraise the various categories of issues of debentures and redemption. Free pdf download of cbse accountancy multiple choice questions for class 12 with answers chapter 8 issue of debentures. 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. The word debenture translates to a written instrument as debt. 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. Hence when their period expires, debenture holders are paid back their principal amount. Students can solve ncert class 12 accountancy issue of debentures mcqs pdf with answers to know their preparation. Debentures are backed only by the general creditworthiness and reputation of. If you have any query regarding ts grewal accountancy class 12 solutions chapter 10 redemption of debentures, drop a comment below and we will get back to you at the earliest.
Amount of funds required for redemption of debentures is quite large and, therefore, prudent companies make sufficient provision out of profits and accumulate funds. Redemption out of capital, debentures may be redeemable on or before maturity. Debenture includes debenture stock, bonds or any other securities of a company whether constituting a charge on the asseets of the com. By doing this the company is indicating that it is. Introduction, issue of debentures and various cases from the point of view of redemption 1. When debentures are redeemed, liability on account of debentures is discharged.
Ts grewal accountancy class 12 solutions chapter 10. Calculate the amount of debentures redemption reserve which needs to be created to meet the requirements of law. When debentures are reclaimed, liability on account of debentures is being discharged. Understand the various ways of issue of debenturesfor cash, other than cash, as a collateral security. In this article we will discuss about the redemption of debentures. A study on issue and problems on redemption of debentures. Under section 71 1 of the companies act, 20, a company may issue debentures. To put it in other words, the amount of capital needed for redemption of debentures is large and, hence. Ts grewal accountancy class 12 solutions chapter 10 redemption of debentures.
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. February 07, 20 in corporate accounting, debentures, dibrugarh university, dibrugarh university notes, semester ii. Redemption of debentures can be accomplished either through, sinking fund it is a cash set aside perodically for retiring debentures. 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. All the debentures are redeemed on the redemption date specified in the terms of issue, i. Traditionally, the government issued bonds, but these days, bonds are also being issued by semigovernment and nongovernmental organisations. Redemption of debentures refers to payment of the amount of debentures by the enterprise. Free pdf download of cbse accountancy multiple choice questions for class 12 with answers chapter 9 redemption of debentures.
Redemption of debentures methods of redemption of debentures. The companies act has not laid down any conditions for the redemption of debentures. The company decided to transfer out of profits t 5,00,000 to debenture redemption reserve on 31st march, 2008 and rs 4,50,000 on 31st march, 2009. Redemption of debentures refers to the repayment of these debentures by the company to the debenture holders.
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