Page 1 - LN REDEMPTION OF DEB

CLASS -XII

ACCOUNTANCY

LESSON NOTES – REDEMPTION OF DEBENTURES

Meaning of Redemption of Debenture:

Meaning: Redemption of debentures means repayment of the due amount
of debentures to the debenture holders. It may be at par or at premium.

Time of redemption :

• At maturity: when repayment is made at the date of maturity of

debentures which is determined at the time of issue of debentures.

• Before maturity: If articles of association and terms of issue

mentioned in prospectus allows, then a company can redeem its
debentures before maturity date.

Sources of Redemption of debentures

• Proceeds from fresh issue of share capital or debenture holders.
• From accumulated profits.

• Proceeds from sale of fixed assets.

• A company may purchase its own debentures out of its surplus funds.

Two terms which are used in the redemption of debentures

• Redemption out of capital : When a company not used its reserve or

accumulated profit for redemption of its debentures. It is called
redemption out of capital. So company using this method are not

transfer it profit to DRR A/c. But as per SEBI guidelines it is necessary