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Joint Stock Company Accounts : Redemption of Debenture

ICSE · Class 12 · Accountancy

Quick revision notes for Joint Stock Company Accounts : Redemption of Debenture — ICSE Class 12 Accountancy. Key concepts, formulas, and definitions for last-minute revision.

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Key Topics to Revise

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1. Meaning, methods, and sources of redemption

  • Redemption of debentures means repayment of debenture amount to the debentureholders.
  • The terms and conditions of issue and redemption of debentures are specified in the debenture certificate.
  • Main methods of redemption are: redemption in a lump sum, redemption in annual instalments by draw of lots, and redemption by purchase in the open market.
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2. Debenture Redemption Reserve and legal rules

  • Debenture Redemption Reserve is a reserve retained out of profits available for dividend for redeeming debentures before redemption begins.
  • Debenture Redemption Reserve appears in the Balance Sheet under Shareholder’s Funds and sub-head Reserves and Surplus.
  • A company must create Debenture Redemption Reserve equivalent to at least 25% of the debentures issued before redemption commences.
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3. Redemption through fresh issue or out of profits/capital

  • A company may redeem debentures from the proceeds of fresh issue of shares or debentures.
  • Redemption from fresh issue does not affect the financial position of the company in the same way as using current resources.
  • Redemption out of capital uses current resources and can weaken working capital.
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4. Accounting entries for issue and redemption of debentures

  • At issue, Bank A/c is debited and Debenture Application and Allotment A/c is credited when money is received.
  • When debentures are issued at a discount, Discount on Issue of Debentures A/c is debited.
  • When debentures are issued at a premium, Securities Premium Reserve A/c is credited.

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Full Notes

Key Concepts

Redemption of debentures means repaymentThe three methods are redemptionAll debentures are redeemed atThe total amount of debenturesA company

Frequently Asked Questions

What are the important topics in Joint Stock Company Accounts : Redemption of Debenture for ICSE Class 12 Accountancy?
Key topics in Joint Stock Company Accounts : Redemption of Debenture include Debenture Redemption Process and Accounting Treatment, Redemption of Debentures — Complete Concept Map, Flow showing the redemption process from issuance to discharge of liability. These are the concepts ICSE Class 12 examiners draw on most — study them first, then practise related questions.
How to score full marks in Joint Stock Company Accounts : Redemption of Debenture — ICSE Class 12 Accountancy?
Understand the core concepts first, then work through the 44 practice questions available for this chapter. Revise formulas and definitions regularly, and use flashcards for quick recall before the exam.

Sources & Official References

Content is aligned to the official syllabus. Refer to the board website for the latest curriculum.

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