Question

Profit on sale of debenture redemption fund investments in the first instance is credited to ______.

Options

• Debenture redemption fund account

• Profit and loss appropriation account

• General reserve account

• None of the above

Answer 1

Profit on sale of debenture redemption fund investments in the first instance is credited to Debenture redemption fund account.

Explanation:

The balance in the sinking fund is transferred to general reserve after all debentures have been redeemed, but the percentage of profit on the sale of sinking fund investments is ideally transferred to general reserve. Only an amount equal to the face value of the debentures redeemed will be moved to general reserve if only a portion of the debentures are redeemed.