Tag: redemption by payment in lump sum

Questions Related to redemption by payment in lump sum

Profit on sale of sinking fund investment is credited to ______________.

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. General reserve

  2. Capital reserve

  3. Sinking fund

  4. None of these

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Correct Option: C
Explanation:

Profit or loss on sale of investments is transferred to sinking fund. After the redemption of all debentures, balance left in sinking fund is transferred to general reserve but the portion of the profit on sale of sinking fund investment is preferably transferred to capital reserve.

Sinking fund is _________.

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. always general purpose fund

  2. always for some specific purpose

  3. both purposes (A & B)

  4. none of the above

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Correct Option: B

After the redemption of debentures, any credit balance in the Sinking Fund A/c is transferred to ______ A/c.

elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

  1. General reserve

  2. Capital reserve

  3. P & L

  4. None of these

Show answer
Correct Option: A
Explanation:

After the redemption of all debentures, balance left in sinking fund is transferred to general reserve but the portion of the profit on sale of sinking fund investment is preferably transferred to capital reserve.