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प्रश्न
What is meant by the conversion of debentures? Describe the method of such a conversion.
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उत्तर
When a debenture holder can convert his/her debentures into shares or new debentures after the expiry of a specified period of time, then it is known as the redemption of debentures by conversion. As the company does not need to pay any funds for the redemption, so there is no need to maintain Debenture Redemption Reserve (DRR). The new shares or debentures may be issued at par, premium or at discount.
If a debenture holder exercises the conversion option, then the issue price of shares must be equal to or less than the amount actually received from debentures.
Accounting Treatment
- For amount due to debenture holders
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Debenture A/c |
Dr. |
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To Debenture holders A/c |
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(Debentures redeemed) |
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- For discharging liability to the debenture holders
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Debenture holders A/c |
Dr. |
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To Shares/Debentures (New) A/c |
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(Debenture holder amount discharged) |
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संबंधित प्रश्न
What is meant by redemption of debentures?
What is meant by the redemption of debentures by conversion?
What is meant by redemption of debentures out of Capital?
Differentiate between redemption of debentures out of capital and out of profits.
Describe the steps for creating a sinking fund for the redemption of debentures.
A company issued debentures of the face value of Rs 5,00,000 at a discount of 6% on April 01, 2012. These debentures are redeemable by annual drawings of Rs,1,00,000 made on March 31 each year. The directors decided to write off discount based on the debentures outstanding each year.
Calculate the amount of discount to be written-off each year. Give journal entries also.
A company issued 10% Debentures of the face value of Rs,1,20,000 at a discount of 6% on April 01, 2011. The debentures are payable by annual drawings of Rs 40,000 commencing from the end of third year.
How will you deal with discount on debentures?
Show the discount on debentures account in the company ledger for the period of duration of debentures. Assume accounts are closed on March 31 every year.
What journal entries will be made in the following cases when company redeems debentures at the expiry of period by serving the notice: (a) when debentures were issued at par with a condition to redeem them at premium; (b) when debentures were issued at premium with a condition to redeem that at par; and (c) when debentures were issued at discount with a condition to redeem them at premium?
Which of the methods can be adopted to write off discount/loss on issue of debentures against the revenue profits?
Which of the following given statement is correct.
Statement 1 - "Bond and debentures are same in terms of contents and texture."
Statement 2 - "Bond and debentures are not same in terms of contents and texture."
Consider the following statements.
Statement 1 - "No DRR is required for debentures issued by All India Financial Institutions, regulated by RBI and Banking Companies for both public as well as privately placed debentures".
Statement 2 - DRR is required for debentures issued by All India Financial Institutions, regulated by RBI and Banking Companies for both public as well as privately placed debentures"
Give the necessary journal entries at time of redemption of debentures
"X Ltd. issued 500, 9% debentures of Rs.100 each at par and redeemable at par at the end of 5 years out of capital."
Shashi Ltd. decided to redeem its 8,000, 11% Debentures of ₹ 100 each at a premium of 10%. The minimum amount transferred to Debenture Redemption Reserve will be: (assume that the company is not listed)
According to SEBI guidelines, what percentage of the amount of debentures must be transferred to Debenture Redemption Reserve, before the commencement of redemption of debentures, in the case of convertible debentures?
Premium on Redemption of Debentures Account is a ______ Account.
Premium on Redemption of Debentures Account is a ______.
