Debentures Redemption Reserve (DRR)

• Debenture Redemption Reserve (DRR) is a reserve created out of the profits available for dividends to ensure funds are available for the redemption of debentures.
• The transfer of profit to DRR is an appropriation of profit and is not treated as an expense in the accounts.
• According to Section 71(4) of the Companies Act, 2013, the amount in DRR can be used only for redeeming debentures.
• Companies such as listed companies, banking companies, AIFIs, NBFCs, HFCs, and other financial institutions are not required to create a DRR.
• Only unlisted companies (excluding NBFCs and HFCs) are required to create a DRR, and the amount must be at least 10% of the outstanding debentures' value.

1. For transferring amount to Debenture Redemption Reserve:

General Reserve A/c                                                            ...Dr.

Dividend Equalisation Reserve A/c                                     ...Dr.

Surplus,i.e., Balance in Statement of Profit & Loss A/c      ...Dr.

        To Debentures Redemption Reserve A/c

(Being the amount transferred to DRR)

2. When all Debentures are Redeemed together

Debentures Redemption Reserve A/c        ....Dr.

       To General Reserve A/c