CBSE class 12 commerce classes | Accountancy Class

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CBSE class 12 commerce classesAccountancy Class
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CBSE class 12 commerce classesAccountancy Class

• Our new topic is Debenture Redemption
  Reserve for CBSE Class 12 Commerce. Accountancy is
  a scoring subject and for its, Student need to
  understand the topic and logic clearly, so he/she
  can solve any tricky question within a specified
  time. While taking consideration, we are going to
  discuss Important topic Debenture Redemption
  Reserve. Most companies retire debentures by
  issuing another set of debentures, or through
  repayment of debentures. And for payment they
  arrange funds through Capital, Profit etc. hence,
  most companies create a fund through reserves
  i.e., Debenture Redemption Reserve (DRR).
• Study complete accounting treatment of Shares and
  debentures with CBSE Class 12 Commerce Classes.

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CBSE class 12 commerce classesAccountancy Class

• CBSE Class 12 Commerce Classes Debenture
  Redemption Reserve is a specific reserve created
  out of profits by a company for the purpose of
  redemption of debentures. It is the amount set
  aside out of the amount available for payment as
  divided to the shareholders of the company.
  Section 71 (4) of the companies Act, 2013 along
  with Rule 18(7) of the companies (share capital
  and Debentures) Rules, 2014 provides the amount
  to be set aside as a Debenture Redemption
  Reserve, investment to be made for redeeming the
  debentures and other conditions to be complied
  with.
• The company redeeming the debentures is required
  to transfer out of the amount available for
  payment as dividend to shareholders to Debenture
  Redemption Reserve at least 25 of the total
  nominal (face) value of the debentures of a
  particular class that are to be redeemed. For
  example, Tejas Ltd. has issued two categories of
  debentures, i.e., 20000, 10 Debentures of Rs.
  100 each and 25000, 11 Debentures of Rs. 100
  each. 11 Debentures are to be redeemed. The
  company shall have to transfer rs 6,25,000 (25
  of 25,00,000) to Debenture Redemption Reserve.

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CBSE class 12 commerce classesAccountancy Class
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CBSE class 12 commerce classesAccountancy Class

• Debenture Redemption Reserve is created for
  Non-convertible Debentures (NCD) or for
  Non-convertible part of partly convertible
  Debentures.
• Journal entry for transfer to debenture
  redemption reserve
• Surplus balance in statement of profit loss
  A/c                 Dr..
• To Debenture Redemption Reserve A/c
• A company may transfer the amount to DRR in lump
  sum or in parts.
• Exemptions to create a Debeneture Redemption
  Reserve (DRR)
• The Companies Act 2013 read along with Rule
  18(7)(b) exempts following companies from
  creating Debentures Redemption Reserve
• All India Financial Institutions(AIFIs) regulated
  by Reserve Bank of India.
• Other Financial Institutions regulated by Reserve
  Bank of India.
• Banking Companies
• National Housing Finance Company.

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CBSE class 12 commerce classesAccountancy Class

• Requirements under Circular 2013
• The Circular 2013 has following effect

Category Amount of DDR to be maintained
All India Financial Institutions (AIFIs)regulated by Reserve Bank of India and banking companies No DDR required for both public as well as privately placed debentures.
Other financial institutions within the meaning of Section 4A of the act. As applicable to NBFCs registered with the RBI.
NBFCs registered with the RBI under Section 45IA of the RBI (Amendment) Act, 1997. 1.25 of the value of debentures issued through public issue as per SEBI(Issue and Listing of Debit Securities)Regulation,2008. 2.No DDR in case of privately placed debentures.
Other Companies including manufacturing and infrastructure Companies. 1.25 of the value of debentures issued through public issue as per SEBI(Issue and Listing of Debit Securities)Regulation,2008. 2. 25 in case of privately placed debentures by listed Companies. 3. 25 of the value of debentures in case of privately placed debentures by unlisted companies.
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CBSE class 12 commerce classesAccountancy Class

• Disclosure of Debenture Redemption Reserve in
  Balance Sheet
• Debenture Redemption Reserve is shown in the
  equity and Liabilities part of the Balance sheet
  under the head ShareholdersFund and sub-head
  Reserves and surplus.
• Debenture Redemption Reserve is transferred to
  General Reserve when all the debentures have been
  redeemed. The entry passed at the time of
  transfer is
• Debenture Redemption Reserve A/c 
                      Dr
•                To General Reserve A/c
• Study more about DRR and CBSE Class 12 commerce
  classes Click here Recorded Accountancy
  classes, CBSE Class 12 commerce classes, Solved
  question papers of accounts by experienced
  faculties in English and Hindi is available. For
  demos click here
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