In the NCERT book, not in the CBSE 2026–27 exam: lump sum, draw of lots, open-market purchase, conversion, DRR and DRI.
| DRR; DRI | 10% of outstanding; 15% of those maturing in the year |
| Amount due | face value + premium on redemption |
| Profit on own debentures | face value − (cost + expenses) |
| Shares on conversion | amount due ÷ issue price of one share |
Greenleaf Ltd, an ‘other unlisted’ company, decided to redeem 5,700 11% Debentures of ₹100 each at par. It created the required Debenture Redemption Reserve, made the required Debenture Redemption Investment and encashed it at redemption. It bought 3,300 of the debentures in the open market at ₹90 each, with expenses of ₹1,500, and cancelled them; the rest were redeemed at par by draw of lots. Pass the journal entries.
Working: DRR ₹57,000, DRI ₹85,500; cost 3,300 × ₹90 + ₹1,500 = ₹2,98,500, profit ₹31,500; by lots 2,400 × ₹100
Answer: (i) Surplus, i.e. Balance in Statement of Profit and Loss A/c Dr. ₹57,000
To Debenture Redemption Reserve A/c ₹57,000
(DRR of 10% of the debentures)
(ii) Debenture Redemption Investment A/c Dr. ₹85,500
To Bank A/c ₹85,500
(15% invested)
(iii) Bank A/c Dr. ₹85,500
To Debenture Redemption Investment A/c ₹85,500
(investment encashed)
(iv) 11% Debentures A/c Dr. ₹3,30,000
To Bank A/c ₹2,98,500
To Profit on Redemption of Debentures A/c ₹31,500
(own debentures bought and cancelled)
(v) Profit on Redemption of Debentures A/c Dr. ₹31,500
To Capital Reserve A/c ₹31,500
(capital profit transferred)
(vi) 11% Debentures A/c Dr. ₹2,40,000
To Bank A/c ₹2,40,000
(debentures redeemed by draw of lots)
(vii) Debenture Redemption Reserve A/c Dr. ₹57,000
To General Reserve A/c ₹57,000
(DRR transferred after redemption)