Question

Assertion (A): The Debenture Redemption Reserve Account appears on the equity & liability side of Balance Sheet under the head ‘Reserves and Surplus’.

Reason (R): Debenture Redemption Reserve is transferred to capital reserve after redemption.

In the context of the above two statements, which of the following is correct?

Options

• Both (A) and (R) are correct and (R) is the correct reason of (A).

• Both (A) and (R) are correct but (R) is not the correct reason of (A).

• Only (A) is correct.

• Both (A) and (R) are wrong.

Answer 1

Only (A) is correct.

Explanation:

Debenture Redemption Reserve (DRR) is shown under ‘Reserves and Surplus’ on the equity and liability side of the Balance Sheet. After redemption, DRR is transferred to General Reserve, not Capital Reserve.