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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 and Concept of Redemption of Debentures

  • Redemption refers to repayment of debenture amount to debentureholders
  • It discharges the company's liability on account of debentures issued
  • Terms and conditions of redemption are specified in the debenture certificate
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2. Methods of Redemption of Debentures

  • Method 1: Redemption in a lump sum - all debentures repaid at once after fixed period
  • Method 2: Redemption in annual instalments by draw of lots - repaid in equal/unequal annual parts, selected by lottery
  • Method 3: Redemption by purchase in open market - company purchases own debentures from stock exchange and cancels them
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3. Legal Requirements - Debenture Redemption Reserve (DRR)

  • Section 71 of Companies Act 2013 mandates creation of Debenture Redemption Reserve
  • Minimum 25% of debenture amount must be transferred to DRR before redemption starts
  • DRR is created from surplus available for dividend
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4. Journal Entries at Time of Issue

  • Entry 1: Record application money received
  • Entry 2: Adjust application money against debentures and record premiums/discounts
  • Premium on issue goes to Securities Premium Reserve

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Full Notes

Key Concepts

Redemption refers to the repaymentThere are three primary methodsAs per Section 71(4) of CompaniesAs per Rule 18(7)(c) of CompaniesAt issue

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Sources & Official References

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

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