Question

On 31st March, 2021, the books of Pragya Ltd. (an unlisted manufacturing company) showed the following closing balances:

7% Debentures (redeemable on 30th September, 2022)	₹ 60,00,000
Debenture Redemption Reserve	₹ 2,00,000

In order to meet the provisions of the Companies Act, 2013, the company transferred the required balance amount to Debenture Redemption Reserve Account on 31st March, 2022. It met the requirements of Debenture Redemption Investment.

You are required to prepare the Debenture Redemption Reserve Account for the years 2021-22, 2022-23.

Answer 1

Dr.	Debenture Redemption Reserve Account				Cr.
Date	Particulars	Amount (₹)	Date	Particulars	Amount (₹)
2021-2022			2021-2022
			Mar 31	By Balance b/d	2,00,000
Mar 31	To Balance c/d	6,00,000	Mar 31	By Profit & Loss A/c	4,00,000
		6,00,000			6,00,000
2022-2023			2022-2023
Apr 1	To General Reserve	6,00,000	Sep 30	By Balance  b/d	6,00,000
		6,00,000			6,00,000

Working Notes:

1. Total 7% Debentures = ₹ 60,00,000
2. DRR Requirement for Unlisted Company (Manufacturing) = 10% of face value (as per Companies Act, 2013)
   10% of ₹ 60,00,000 = ₹ 6,00,000
3. Existing DRR balance = ₹ 2,00,000
4. Additional transfer needed on 31st March 2022: ₹ 6,00,000 − ₹ 2,00,000 = ₹ 4,00,000
5. DRR to be transferred to General Reserve after redemption (on 30th September 2022) = ₹ 6,00,000