Issue & Redemption of Debentures Class 12 NCERT Solutions PDF

Quick reading. Think of a debenture as a loan slip the company hands you: you pay money, the company promises a fixed rate of interest and the return of principal after a stated period.

1. Acknowledgement of debt → holder is a creditor.
2. Fixed-rate interest paid even in loss years.
3. Repaid after fixed term (often 5–10 years).
4. May be secured (charge on assets) or unsecured.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Debenture = company's loan slip; creditor relationship; fixed-rate interest; repayable on maturity.

Quick reading. Bearer = ``whoever holds it.'' Like cash, ownership passes with delivery; no paperwork.

1. Anonymous transfer; no register kept.
2. Detachable interest coupons.
3. Negotiable instrument ⇒ bona-fide holder gets clean title.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Bearer debenture = transferable by delivery + coupon-paid interest + negotiable instrument.

Strategic angle. Two securities, one loan: the principal security (e.g. hypothecation of stock) and the back-up (debentures). No cash flows for the debentures themselves.

1. Lender takes principal security + collateral debentures.
2. No cash, no interest on collateral.
3. On default, lender claims under collateral; debentures spring to life.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Back-up cover only; no cash, no interest; activated on default.

Quick reading. Pay the vendor in debentures rather than cash.

1. Compute purchase consideration agreed with vendor.
2. Divide by issue price to get number of debentures.
3. Pass two entries: asset purchase + payment in debentures.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Vendor paid in debentures; number = PC ÷ issue price.

Quick reading. Company loses twice: less cash in at issue, more cash out at redemption. Both losses are booked upfront.

1. Cash in = face - discount.
2. Cash out = face + premium.
3. Total loss = discount + premium ⇒ Dr. Loss on Issue.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Loss on Issue = Discount + Premium on Redemption; both booked at issue date.

Strategic angle. The word ``capital'' restricts use: dividends come from revenue profits, not capital profits.

1. Capital profit (asset sale, forfeiture) → Capital Reserve.
2. Cannot be drawn as cash dividend.
3. Used for bonus shares or to absorb capital losses.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Capital Reserve = from capital profits; never paid as dividend; funds bonus shares.

Quick reading. ``Never to be redeemed'' except when the company itself ceases.

1. No maturity date in the deed.
2. Interest paid forever, principal stays as long as company runs.
3. Now banned in India (Section 71(4), Companies Act 2013).

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Perpetual debenture; principal only on liquidation; banned in India after 2014.

Quick reading. Debt with an option to swap into equity later. Investor enjoys both worlds.

1. Fully (FCD), partly (PCD), or compulsorily (CCD) convertible.
2. Interest paid until conversion date.
3. Conversion price fixed at issue.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Debt-now, equity-later instrument; FCD / PCD / CCD / OCD variants.

Strategic angle. ``Mortgaged'' = ``secured by a charge.'' Charge registered, trustees appointed, recovery path defined.

1. Charge created on assets (fixed / floating).
2. Section 77 registration; Section 71(5) trustee.
3. Default ⇒ trustees sell asset; debenture-holders paid before unsecured creditors.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Secured-by-asset; RoC-registered charge; trustee-protected.

Quick reading. Issued below par ⇒ the shortfall is the discount ⇒ a capital loss spread over the life of the debenture.

1. Discount = Face - Issue Price.
2. Booked as deferred capital loss.
3. Written off year by year over the debenture's tenure.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Capital loss; amortised over the debenture's life.

Quick reading. Extra cash going out at maturity, but recognised upfront.

1. Premium = Redemption - Face value.
2. Liability shown until redemption.
3. Forms part of Loss on Issue together with discount.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Extra payable at maturity; booked at issue; part of Loss on Issue.

Strategic angle. Memorise the contrast as a 2-column table: owner/creditor, dividend/interest, profit-only/charge, voting/no-voting, repayable/not, last/first on liquidation.

1. Shareholder = owner; debenture-holder = creditor.
2. Dividend variable, paid from profits; interest fixed, paid always.
3. Voting (shares) vs no voting (debentures).

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Owner vs Creditor; Dividend vs Interest are the two anchor differences.

Quick reading. ``Paying back'' the debenture-holders. Triggered by the agreed maturity date; funded out of capital, out of profits, or by a new issue.

1. Maturity date or early-redemption clause arrives.
2. Pay holders by cash, by new debentures, by shares, or by open-market purchase.
3. Comply with DRR / DRI rules.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Repayment of debenture liability on / before maturity; four modes; Section 71 governs.

Quick reading. Yes, with two routes: cancel now or invest now and cancel later.

1. Articles allow + trust deed silent.
2. Cancel ⇒ profit to Capital Reserve.
3. Hold as investment ⇒ Own Debentures A/c.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Yes; cancel or invest; profit on cancellation → Capital Reserve.

Strategic angle. Swap debt for equity. No cash, no DRR.

1. Conversion price fixed at issue.
2. Number of new shares = amount payable / share issue price.
3. Premium portion (if any) to Securities Premium Reserve.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Debt → equity swap; cash-free; DRR not needed.

Quick reading. Three steps: book at issue, write off the loss over life, pay at maturity.

1. Issue: Dr. Loss on Issue, Cr. Premium on Redemption A/c.
2. Life: write off Loss against Securities Premium / P&L.
3. Redemption: Dr. Debentures & Dr. Premium on Redemption; Cr. Bank.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Book at issue → write off over life → pay at maturity.

Strategic angle. Use it when own debentures trade at a discount in the market; capture the saving as Capital Reserve.

1. Authority: Articles permit + trust deed silent.
2. Cum-int. vs ex-int. price split.
3. Cancel ⇒ profit to Capital Reserve; Invest ⇒ Own Debentures A/c.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Buy own debentures from market; cancel or invest; profit to Capital Reserve.

Strategic angle. Four independent classification axes; each debenture is one tag from each axis ⇒ 2 × 2 × 2 × 2 = 16 possible label combinations in principle.

1. Security → Secured / Naked.
2. Repayability → Redeemable / Irredeemable.
3. Records → Registered / Bearer.
4. Convertibility → Convertible / Non-Convertible.
5. Bonus categories: Zero-coupon, Collateral, First/Second.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Four axes: Security, Repayability, Records, Convertibility. Plus Zero-coupon and Collateral as bonus categories.

Strategic angle. Owner vs creditor is the master distinction. The debenture's promise to repay is the reason it is ``loan'' capital, just packaged as a tradeable security.

1. Distinguish on six points: relationship, return, voting, repayment, security, priority on winding-up.
2. Debenture is loan because: fixed interest, fixed maturity, creditor status, charge permissible.
3. Difference from ordinary loan: tradeable on stock exchange; can be held by the public.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Loan with a marketable certificate; creditor status with fixed return and definite maturity.

Strategic angle. Two methods, two presentations. Method 2 brings the collateral debentures onto the books symmetrically; Method 1 keeps them off the books with a memo.

1. Method 1: only a note under the loan in BS.
2. Method 2: Dr. Debenture Suspense; Cr. Debentures (face value).
3. In BS, Debenture Suspense = deduction from Debentures ⇒ net zero.
4. Loan repaid ⇒ reverse the entry; debentures cancelled.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Memo OR Suspense-and-Debenture journal; both end at net zero on BS.

Strategic angle. The matrix has six cells. Memorise: Discount → Loss; Premium at issue → Securities Premium; Premium on redemption → Loss on Issue with Premium on Redemption as liability.

1. Six cases = 3 issue prices × 2 redemption prices.
2. All six credit Debentures at face value.
3. Discount and Premium on Redemption ⇒ Loss on Issue; written off over life.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Six cases; Debentures always credited at face; losses to Loss on Issue, premia to Securities Premium / Premium on Redemption.

Strategic angle. The split between ``out of capital'' and ``out of profits'' is mostly historical; post-2019, the DRR landscape has been liberalised. Still examined in NCERT.

1. Out of capital: divisible profits intact; DRR only at statutory minimum.
2. Out of profits: full DRR; creditors protected.
3. Post-2019: DRR slashed to 10% for unlisted public companies; nil for listed / NBFC / HFC.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Out of capital = no DRR; out of profits = full DRR. Current rule: 10% (others), nil (listed / NBFC / HFC).

Quick reading. Two numbers: 10% (DRR) and 15% (DRI). Listed companies are entirely exempt from DRR after the 2019 amendment.

1. DRR = 10% of outstanding debentures (unlisted non-NBFC public co.).
2. DRI = 15% of debentures maturing in that year, deposited by April 30.
3. Listed / NBFC / HFC: no DRR.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

10% DRR (others), nil (listed / NBFC / HFC); 15% DRI by April 30 of redemption year.

Strategic angle. Sinking Fund is depreciation-fund logic applied to a liability rather than an asset. Annual instalment grows to face value at compound interest.

1. Compute A = Fi/[(1+i)ⁿ - 1].
2. Each year: appropriate A, invest, collect interest, reinvest.
3. Final year: realise investments, pay debenture-holders, balance to General Reserve.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Annual A + compound interest → face value F at maturity.

Quick reading. Yes, with conditions. Two routes, two outcomes.

1. Articles + trust deed permit.
2. Cancel ⇒ profit (Face - Cost) to Capital Reserve.
3. Hold ⇒ Own Debentures A/c as investment.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Permitted; cancel or hold; profit on cancellation → Capital Reserve.

Strategic angle. Conversion turns debt into equity (or new debt). No cash, no DRR; the debenture-holder becomes a shareholder.

1. Conversion right must exist at issue (FCD / PCD / CCD / OCD).
2. Number of shares = Amount Payable / New Share Issue Price.
3. Dr. Debentures + Premium on Redemption; Cr. Share Capital + Securities Premium.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Cash-free swap; number = amount payable / issue price.

Quick reading. Simple two-stage issue at par; four journal entries; total Rs. 37.5 crore raised.

1. Application: 75,00,000 × 15 = Rs. 11.25 crore.
2. Allotment: 75,00,000 × 35 = Rs. 26.25 crore.
3. Each stage two entries: Bank receipt + transfer to Debentures.
4. Listed company ⇒ DRR exempt; DRI 15% only in maturity year.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Rs. 37.5 crore raised; 4 entries; DRR exempt.

Quick reading. Standard three-stage par issue. Two entries per stage; six in total.

1. Application Rs. 50,000 → Bank, then Debentures.
2. Allotment Rs. 1,00,000 → Allotment due, then Bank receipt.
3. Call Rs. 50,000 → Call due, then Bank receipt.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Rs. 2,00,000 total face value; 6 entries.

Quick reading. Issue price Rs. 105 split into Rs. 100 face + Rs. 5 premium. Premium credited at allotment.

1. Per deb: App Rs. 10, Allot Rs. 20 + Rs. 5 prem, Call Rs. 70.
2. Allotment entry has THREE credits: Capital (Rs. 2,00,000), Premium (Rs. 50,000); the Allotment A/c receivable line is the total Rs. 2,50,000.
3. Total cash Rs. 10,50,000; debentures liability Rs. 10,00,000; SPR Rs. 50,000.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Premium Rs. 50,000 to SPR; face Rs. 10,00,000 to Debentures.

Quick reading. Discount = 8% × Rs. 50 = Rs. 4 per debenture. Bank in = Rs. 46; debit Discount Rs. 4; credit Debentures Rs. 50 each.

1. Issue price per deb Rs. 46; discount Rs. 4.
2. Cash in = Rs. 41.40 crore.
3. Discount = Rs. 3.60 crore (capital loss).
4. Debenture liability = Rs. 45.00 crore.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Cash 41.40 + Discount 3.60 = Debentures 45.00 crore.

Strategic angle. Pro-rata + reject mix needs careful tracking of three pots of application money: (1) to capital, (2) adjusted to allotment, (3) refunded.

1. Pots: Rs. 80,000 (capital) + Rs. 8,000 (allotment) + Rs. 8,000 (refund) = Rs. 96,000.
2. Allotment net cash = Rs. 72,000 (after Rs. 8,000 adjustment).
3. Each call Rs. 1,20,000; total Rs. 4,00,000 raised.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Rs. 4,00,000 raised; net allotment cash Rs. 72,000 after excess adjustment.

Strategic angle. The Rs. 50 premium per debenture rides along with the application money. Care needed in splitting application money into (i) face/capital, (ii) premium, (iii) excess adjusted to allotment.

1. Issue price Rs. 550 = Rs. 500 face + Rs. 50 premium.
2. Application Rs. 200 carries the full premium of Rs. 50 + Rs. 150 capital.
3. Application money apportioned: Rs. 3 cr (capital) + Rs. 1 cr (premium) + Rs. 2 cr (allotment adjusted) = Rs. 6 cr.
4. Net cash on allotment Rs. 5 cr.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Rs. 11 cr cash; Rs. 10 cr debentures; Rs. 1 cr premium; Rs. 2 cr adjustment.

Strategic angle. Same as Q5 but with 40% pro-rata (not 50%) and different bucket sizes. Same three pots of application money.

1. Allotments: 8,000 in full + 2,000 (40% of 5,000) + 500 rejected.
2. Application pots: Rs. 2,00,000 (capital) + Rs. 60,000 (allotment) + Rs. 10,000 (refund) = Rs. 2,70,000.
3. Allotment net cash Rs. 5,40,000; call Rs. 2,00,000.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Rs. 10,00,000 face value raised; net cash flow tallies.

Quick reading. Classic discount + premium double-loss case. Loss = Discount (Rs. 14) + Premium on Redemption (Rs. 16) = Rs. 30 per debenture, totalling Rs. 6 crore.

1. Cash in Rs. 37.20 cr (186 × 20,00,000).
2. Loss Rs. 6 cr (30 × 20,00,000).
3. Debentures cred Rs. 40 cr; Premium on Redemption cred Rs. 3.20 cr.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

37.20 + 6.00 = 40.00 + 3.20 (cr).

Quick reading. Net assets Rs. 8.30 crore = PC. At par, divide by Rs. 100 = 8,30,000 debentures issued.

1. PC = 9 cr - 70 lakh = Rs. 8.30 crore.
2. At par ⇒ 8,30,000 debentures of Rs. 100.
3. Two entries: take over, then pay in debentures.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

8,30,000 debentures @ Rs. 100 each issued for Rs. 8.30 crore PC.

Strategic angle. Take-over entry first, then payment entry differs across the three issue terms. Fractional debentures paid in cash absorb the rounding-off remainder.

1. Net assets Rs. 3.50 lakh; PC Rs. 3.80 lakh; Goodwill Rs. 30,000.
2. (a) 3,80,000 / 100 = 3,800 deb (no fraction).
3. (b) 3,80,000 / 90 = 4,222.22; 4,222 deb + Rs. 20 cash.
4. (c) 3,80,000 / 110 = 3,454.54; 3,454 deb + Rs. 60 cash.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Counts match NCERT answer key: 3,800 / 4,222 / 3,454.

Quick reading. 4,40,000 / 110 = 4,000 debentures. Premium Rs. 40,000 to SPR; face Rs. 4,00,000 to Debentures.

1. Issue price Rs. 110 per deb.
2. 4,000 debentures exactly.
3. Premium Rs. 40,000 to Securities Premium Reserve.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

4,000 deb; Rs. 4,00,000 face + Rs. 40,000 premium.

Strategic angle. Same nominal value, four wildly different presentations on the BS. Anchor: Debentures A/c is always credited at face value; the offsetting account differs.

1. Premium → SPR.
2. Discount → Discount on Issue (asset).
3. Collateral → Debenture Suspense (contra; net zero BS effect).
4. For machinery → Vendor A/c, then Debentures.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Debentures A/c always credited at face; offsetting account changes by issue type.

Strategic angle. Three of the six cases from Q (LAQ 4): par+par, discount+par, discount+premium, par+premium etc. Three sub-cases here pick (discount,par), (discount,premium), (par,premium).

1. (i) only discount Rs. 5.
2. (ii) discount Rs. 5 + premium Rs. 5 ⇒ Loss Rs. 10.
3. (iii) only redemption premium Rs. 5.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Loss on Issue = Discount + Premium on Redemption.

Strategic angle. Loss = Discount + Premium on Redemption; amortisation weight = debentures outstanding each year. Sum of weights = 150 lakh; total loss / 150 ⇒ per-lakh write-off.

1. Per deb: Discount Rs. 6 + Premium Rs. 4 = Loss Rs. 10.
2. Total Loss Rs. 5 cr.
3. Weights (lakh): 50, 50, 30, 20; sum 150.
4. Write-off: 1.67 cr, 1.67 cr, 1.00 cr, 0.67 cr.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Loss Rs. 5 cr amortised in ratio 50:50:30:20 over 4 years.

Strategic angle. Five distinct issue scenarios; same redemption-at-par logic for all except (i) which pays the redemption premium too.

1. (i) Premium on Redemption Rs. 50,000.
2. (ii) Discount on Issue Rs. 1,00,000.
3. (iii) Premium credit Rs. 2,50,000 to SPR.
4. (iv) Vendor + small discount Rs. 5,000.
5. (v) Suspense Rs. 30,000 against Rs. 25,000 loan.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Five issue patterns, redemption at face/premium per case (i).

Strategic angle. Amortisation weight = debentures outstanding. Ratio 5:5:4:3:2:1 sums to 20; total discount Rs. 30,000 / 20 = Rs. 1,500 per ratio unit.

1. Bank in Rs. 4,70,000; Discount Rs. 30,000.
2. Years 1-2: outstanding 500K; write-off Rs. 7,500 each.
3. Then 400/300/200/100 K → 6,000 / 4,500 / 3,000 / 1,500.
4. 5 annual redemptions of Rs. 1,00,000.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Discount amortised on outstanding-balance method.

Quick reading. Outstanding-balance amortisation. Sum 5+4+3+2+1 = 15; per-unit Rs. 1,600.

1. Cash in Rs. 3,76,000; Discount Rs. 24,000.
2. Year-wise write-off in 5:4:3:2:1 ratio.
3. 5 equal drawings of Rs. 80,000.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Outstanding-balance method; 15-unit ratio.

Strategic angle. Interest entry has three parts every half-year: gross Rs. 6,000 → split into net Rs. 5,400 to holders + Rs. 600 to TDS payable.

1. Half-yearly gross interest = Rs. 6,000.
2. TDS @ 10% = Rs. 600 → TDS Payable A/c.
3. Net Rs. 5,400 paid by Bank to Debenture-holders.
4. Year-end: transfer Rs. 12,000 Debenture Interest to P&L.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Half-yearly gross Rs. 6,000; TDS Rs. 600; net Rs. 5,400.

Strategic angle. Five entry-clusters: (i) issue at par, (ii) write-off of Loss against SPR + P&L, (iii) annual interest with TDS, (iv) DRR build-up, DRI investment, redemption, transfer.

1. Issue: Bank Rs. 60 L; Loss Rs. 12 L Dr; Debentures Rs. 60 L Cr; Premium on Red. Rs. 12 L Cr.
2. Write-off Loss Rs. 12 L: SPR Rs. 5 L + P&L Rs. 7 L.
3. Annual interest gross Rs. 7.20 L; TDS Rs. 72 K; net Rs. 6.48 L.
4. DRR Rs. 2 L × 3 = Rs. 6 L; DRI Rs. 9 L on 1.4.2019.
5. Redemption Rs. 72 L; transfer DRR to General Reserve.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Loss SPR-priority + DRR + DRI + redemption (60 face + 12 premium).

Quick reading. DRR threshold Rs. 5 L; need to top up Rs. 3 L. DRI Rs. 7.50 L on April 01.

1. Top-up DRR by Rs. 3 L on 31.3.19.
2. DRI Rs. 7.50 L on 1.4.19.
3. Redeem Rs. 50 L; transfer DRR to GR.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

DRR 5 L + DRI 7.5 L + Redemption 50 L.

Strategic angle. Three-tranche redemption with 10% premium each. DRR once, DRI each year on debentures maturing.

1. 31.3.18: 10K deb → Rs. 11 L (10 face + 1 prem).
2. 31.3.19: 12K deb → Rs. 13.20 L.
3. 31.3.20: 8K deb → Rs. 8.80 L.
4. DRR Rs. 3 L; DRI in three annual chunks.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Phased redemption Rs. 33 L (Face 30 + Premium 3); DRR Rs. 3 L; staggered DRI.

Quick reading. Single lump-sum at par on a mid-year date; remember the 3-month interest accrual.

1. DRR Rs. 2 L before 1.4.19.
2. DRI Rs. 3 L by 30.4.19.
3. Interest Rs. 60,000 for 3 months.
4. Redeem Rs. 20 L on 30.6.19; transfer DRR to GR.

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Lump-sum at par with 3-month accrued interest at maturity.

Strategic angle. Issue varies across six cases (par/prem/discount); redemption is at par for (i)-(iii) and at 10% premium for (iv)-(vi). Tranche values: Rs. 75,000 or Rs. 82,500.

1. Case (i): plainest.
2. Case (ii): premium → SPR Rs. 30,000.
3. Case (iii): discount Rs. 30,000 to Discount on Issue.
4. Case (iv): Loss Rs. 30,000 (premium only).
5. Case (v): Both SPR Rs. 30,000 + Premium on Redemption Rs. 30,000.
6. Case (vi): Double-loss Rs. 60,000 (discount + premium).

Why this matters. In a Class 12 numerical question on Issue and Redemption of Debentures, the examiner gives full marks only when the candidate distinguishes Discount on Issue of Debentures (a capital loss written off over the life of the debentures) from Premium on Redemption of Debentures (a provision created on issue), applies the Companies (Share Capital and Debentures) Rules 2014 for the Debenture Redemption Reserve, and presents every issue and redemption journal entry in narrated form. A correct closing debenture figure without the DRR working and the narrated journal entries loses 30-50 percent of the marks under the CBSE step-marking scheme.

Common mistakes. Three predictable slips lose marks: (a) confusing Discount on Issue with Premium on Redemption and posting both to the same ledger; (b) ignoring the requirement to create Debenture Redemption Reserve of at least 25 percent of the outstanding debentures before the start of redemption; (c) missing the loss on issue of debentures that arises when debentures are issued at par or discount but redeemed at a premium.

Six cases, four tranches each; tranche value Rs. 75K or Rs. 82.5K.