Company Accounts

Debentures

Medium

When own debentures are cancelled, any profit on cancellation is transferred to:

Profit and Loss Account

General Reserve

Debenture Redemption Reserve

Capital Reserve

✅ Correct Option: 4

When a company purchases its own debentures for cancellation at a price lower than the face value, the difference is a profit of capital nature. Since it arises from capital transactions (redemption of liabilities) and not trading, it is transferred to Capital Reserve.

2026: 21 May Shift 1

"If the company fails to repay the loan along with interest, the lender is free to receive his money from the sale of the primary security and if the realisable value of the primary security falls short to cover the entire amount, the lender has the right to invoke the benefit of additional security whereby debentures may either be presented for redemption or sold in the open market".

Identify the type of issue of debentures stated in the above statement.

2022: 20 July Shift 1

The following journal entry is recorded in the books of RST Ltd. on issue of debentures :

Bank a/c Dr 18,00,000

Loss on issue of Debentures a/c Dr 6,00,000

To 14% Debentures 20,00,000

To Premium on Redemption of Debentunes 4,00,000

Debentures have been issued at a discount of :

2026: 20 May Shift 1

Which of the following is a written instrument acknowledging a debt under the common seal of the company?

2025: 14 May Shift 1

Match List-I with List-II

List-I	List-II
(A) Secured Debentures	(I) Which are payable on the expiry of the specific period either in lump sum or in instalments during the life time of the company.
(B) Unsecured Debentures	(II) Debentures where a charge is created on the assets of the company for the purpose of payment in case of default.
(C) Redeemable Debentures	(III) These debentures are repayable on the winding-up of a company or on the expiry of a long period.
(D) Irredeemable Debentures	(IV) Debentures do not have a specific charge on the assets of the company.

Choose the correct answer from the options given below:

2025: 26 May Shift 2

Blue Prints Ltd., purchased building worth Rs.1,50,000, machinery worth Rs.1,40,000 and furniture worth Rs.10,000 from XYZ Co., and took over its liabilities of Rs. 20,000 for a purchase consideration of Rs. 3,15,000. Blue Prints Ltd., paid the purchase consideration by issuing 12% debentures of Rs.100 each at a premium of 5%. Number of debentures issued are-

2022: 15 July Shift 2

From Coupon Rate Point of view, Debentures are classified into:

When own debentures are cancelled, any profit on cancellation is transferred to:

Solution

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