Question

When all the debentures are redeemed, balance in the debentures redemption fund account is transferred to which reserve?

Options

• Capital reserve

• General reserve

• Profits and loss appropriation account

• None of the above

Answer 1

General reserve

Explanation:

DRR is created from the company's profits and is deducted from the P&L statement (which means profits is reduced). DRR is now shifted to general reserve at the time of debenture redemption to reflect the prior profit drop.