Page 193 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Accounting for Companies-I

Notes Interest on Debenture Redemption Fund Investment A/c
2004 ` 2004 `
Dec. 31 To D.R.F. Account 1,586 Dec. 31 By Bank Account 1,586
1,586 1,586
2005 2005
Dec. 31 To D.R.F. Account 3,251 Dec. 31 By Bank Account 3,251
3,251 3,251

!
Caution Every company has to create a Debenture Redemption Reserve (DRR) equivalent
to 50% of the amount of debentures issue before commencement of redemption on 14.1.1987

Illustration 7 (Redemption of Debentures Out of Sinking Fund)
st
On 1 January, 2006 the following balances stood in the books of a company:
`
12% Mortgage Debenture 3,00,000
Debenture Redemption Fund 3,19,620
Debenture Redemption Fund Investments:
` 1,05,000; 6% Haryana State Electricity Board Bonds 1,06,890
` 1,20,000; 8% U.P. Water Board Bonds 96,102
` 90,000; 6% Government of India Loan 92,565
` 24,000; 9% I.C.I.C.I. Bonds 24,063
On the same day investments were sold: Haryana State Electricity Board Bonds at par, 6%
Government of India loan at ` 109, 8% U.P. Water Board Bonds at ` 91 and ICICI Bonds at ` 103.
On the same day, debentures were redeemed at a premium of 5%.
Write up the accounts concerned (other than cash account) bring down the balances, if any, after
the above transactions have been completed and stating how such balances should be dealt with
the next balance sheet of the company.
Solution:
Debenture Redemption Fund Account
Date Particulars ` Date Particulars `
Jan. 1 To Premium on Red. of Jan. 1 By Balance b/d 3,19,620
Debenture A/c 15,000
To General Reserve 3,04,620 By Debenture
To Capital Reserve 17,400 Redemption Fund Investment A/c 17,400
3,37,020 3,37,020
Debenture-holders’ Account
Date Particulars ` Date Particulars `
Jan. 1 To Bank Account 3,15,000 Jan. 1 By 12% Mortgage Debenture Account 3,00,000
By Premium on Redemption A/c 15,000
3,15,000 3,15,000
12% Mortgage Debenture Account
Date 2006 `
Jan. 1 To Debenture-holders A/c 3,00,000 Jan. 1 By Balance b/d 3,00,000
3,00,000 3,00,000

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