Redemption of Debenture means repayment at the maturity of debenture. Because earlier we told that debentures are long term loan so it is very necessary to redeem the debentures.
1st Method
Lumbsum method
It means when company repay the Lumbsum amount to debenture holder . There following sub method of this method
A) Without Provision
According to Company law , if you have to redeem without any provision , it is necessary to make reserve of debenture redemption reserve with 50% of total amount of debenture so that company can easily repay the debenture without any provision at the time of redemption the following journal entry will pass.
Debenture Account Debit
Debenture holder Account Credit
2nd journal Entry
Profit and loss Appropriation Account Debit
Debenture Redemption Reserve Account Credit
3rd Journal Entry
Debenture holder Account Debit
Bank Account Credit
4th Journal Entry
Debenture redemption Reserve account Debit
General Reserve Account Credit
I will give detail of other method of redemption of debenture in next article.
1st Method
Lumbsum method
It means when company repay the Lumbsum amount to debenture holder . There following sub method of this method
A) Without Provision
According to Company law , if you have to redeem without any provision , it is necessary to make reserve of debenture redemption reserve with 50% of total amount of debenture so that company can easily repay the debenture without any provision at the time of redemption the following journal entry will pass.
Debenture Account Debit
Debenture holder Account Credit
2nd journal Entry
Profit and loss Appropriation Account Debit
Debenture Redemption Reserve Account Credit
3rd Journal Entry
Debenture holder Account Debit
Bank Account Credit
4th Journal Entry
Debenture redemption Reserve account Debit
General Reserve Account Credit
I will give detail of other method of redemption of debenture in next article.
