TS Grewal Class 12 Accountancy Solutions Vol 2 Chapter 10 pdf will be provided in this article. Chapter 10 Redemption of Debentures is one of the important chapters of CBSE Class 12. You can easily download the TS Grewal Class 12 Accountancy Solutions Vol 2 Chapter 10 pdf by clicking on the link providing below in this article.
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TS Grewal Class 12 Accountancy Solutions Vol 2 Chapter 10
Detailed Topics – TS Grewal Class 12 Accountancy Solutions Vol 2 Chapter 10
Meaning: Redemption of Debentures means repayment of the due amount of Debentures Holders. It may be at par or premium.
Time of Redemption:-
- At maturity: When repayment is made at the date of maturity of Debentures which is determined at the time of issue of Debentures.
- Before maturity: if articles of association and terms of the issue mentioned in the prospectus allow, then a company can redeem its Debentures before the maturity date.
Redemption method:-
- Redemption in lump–sum: When Redemption is made at the expiry of a specific period, as per the terms of issue.
- Redemption by draw of lots: in this method, a certain proportion of Debentures are redeemed each year, the debentures for which repayment is to be made are selected by draws of lots.
- Redemption by purchase in the open market: If articles of association of a company authorized, it may purchase its Debentures from the open market i.e., stock exchange.
Sources of Redemption of Debentures:-
- Proceeds from fresh issue of share capital or Debentures holder.
- From accumulates Profit.
- Proceeds from the sale of fixed assets.
- A company may purchase its dentures out of its surplus funds.
It is assumed that the company has invested 15% of the redeemable amount on April 30 and encashed it as per the Companies Act, 2013.
It is also assumed that the company has created Debentures Redemption Reserve @25% of the redeemable debentures and transferred it to General Reserve after Redemption of all the dentures.
Debentures Redemption Reserve:- This Reserve is necessary if Debentures have been purchased for cancellation.
TS Grewal Class 12 Accountancy Solutions Vol 2 Chapter 10 – Sample Questions
In this section, the students will get TS Grewal Class 12 Accountancy Solutions Vol 2 Chapter 10 sample questions along with the answers.
Q1. What is meant by Redemption of Debentures? State the meaning of redemption of Debentures out of profit.
A. Redemption of Debentures is a process of repayment of loans taken by the issue of Debentures.
Redemption of Debentures our of Profit means the amount equal to the amount utilized for repayment to debenture holders is transferred from Surplus, i.e., Balance in Statement of Profit and Loss of Debentures Redemption Reserve.
Q2. What is the method using which the Redemption of Debentures takes place?
A. Debentures can be redeemed by the following methods:-
- In lump sum on maturity
- In installments by drawing of lots.
- By purchase from the open market.
- By conversion.
Q3. State the provisions of the Companies Act, 2013 for the creation of Debentures Redemption Reserve. Name the head under which the Debentures Redemption Reserve is shown in the Balance Sheet.
A. Debenture Redemption Reserve must have a credit of at least an amount equal to 25% of the nominal value of Debentures outstanding Before the redemption of Debentures begins. Debentures Redemption Reserve is shown in the Equity and Liabilities part of the Balance Sheet under the main head Shareholders Fund and sub-head Reserves and Surplus.
We have included complete information regarding CBSE TS Grewal Class 12 Accountancy Solutions Vol 2 Chapter 10 – Redemption of Debentures. If you have any questions feel free to ask in the comment section.
FAQ: TS Grewal Class 12 Accountancy Solutions Vol 2 Chapter 10 – Redemption of Debentures
What is the issue and redemption of debentures?
When the debentures are issued at a price less than its par value (or the face value) and redeemed at a price higher than its par value, then it is termed the issue of debenture at a discount and redeemable at a premium. The difference between the issue price and the redemption price is considered a loss on the issue of debenture.
Which account is used for the redemption of debentures?
A capital reserve account.
What is the journal entry of redemption of debenture?
Premium on redemption of debentures account was given credit when the debentures were issued. On redemption, this account is debited and transferred to Debenture holders’ accounts.
How is the redemption of debentures calculated?
Profit or loss on cancellation will be calculated by comparing the purchase price of debentures canceled with this face value plus the premium payable on redemption according to the terms of the issue.