Question : Puran Store Ltd., an Unlisted Company, is to redeem 5000,8% Debentures of Rs. 100 each on 30th June 2020. It has a balance of Rs. 10,000 in Debentures Redemption Reserve. It decides to set aside the amount to Debentures Redemption Reserve on 31st March 2020 on which date it has
following Reserves and Surplus: Rs.
Securities Premium Reserve 25,000
Capital reserve Rs 20,000
General Reserve 30,000; and
Surplus, i.e., Balance in Statement of Profit and Loss 30,000
Balance Rs. 40,000 can be set aside to Debentures Redemption Reserve from:
Option 1: Capital Reserve and General Reserve
Option 2: Capital Reserve and Securities Premium Reserve
Option 3: General Reserve and Surplus, i.e., Balance in Statement of Profit and Loss
Option 4: Securities Premium Reserve and Surplus, i.e., Balance in Statement of Profit and Loss
Correct Answer: General Reserve and Surplus, i.e., Balance in Statement of Profit and Loss
Solution : Answer = General Reserve and Surplus, i.e., Balance in Statement of Profit and Loss.
Only revenue nature profits are transferred to the Debenture redemption Reserve account, General reserve and surplus of profit and loss are used to create DRR.
Hence, the correct option is 3.
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