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Redemption Of debentures

IPCC 283 views 5 replies
In Which cases DRR is Equated to value of redemption & transferred to General reserve ? & why ?
Replies (5)
When redemption is done by investing in sinking fund method than
After redemption whatever be the b.f. on the debit or credit side of sinking FUND ACCT is transferred to general reserve acct
When debentures are redeemed out of realization of accumulated amount of DRR Investment, then the balance in DRR, which comes equal to the value of redemption, is transferred to General Reserve. The DRR is equated by transferring the profit or loss on DRR Investment to the DRR. This is so because as per Companies Act, Debentures should be redeemed out of profits of the company. General Reserve is accumulated profits. Although DRR is also created out of profits but it contains investment also.
But Why general reserve & not any other reserve ? & Can you specify the relevant section ?
It's an accounting concept, from my point of view.
as it is set out of profits., now the same is transferred to general reserve


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