Tag: redemption by payment in lump sum

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Questions Related to redemption by payment in lump sum

Multiple choice elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

Profit on sale of sinking fund investment is credited to ______________.

  1. General reserve

  2. Capital reserve

  3. Sinking fund

  4. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Profit or loss on sale of investments is transferred to sinking fund. After the redemption of all debentures, balance left in sinking fund is transferred to general reserve but the portion of the profit on sale of sinking fund investment is preferably transferred to capital reserve.

Multiple choice elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

Sinking fund is _________.

  1. always general purpose fund

  2. always for some specific purpose

  3. both purposes (A & B)

  4. none of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A sinking fund is always created for a specific purpose, such as the redemption of debentures or the replacement of a specific asset.

Multiple choice elements of accounts company accounts - redemption of debentures redemption by payment in lump sum accounting effects for redemption of debentures redemption of debentures

After the redemption of debentures, any credit balance in the Sinking Fund A/c is transferred to ______ A/c.

  1. General reserve

  2. Capital reserve

  3. P & L

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

After the redemption of all debentures, balance left in sinking fund is transferred to general reserve but the portion of the profit on sale of sinking fund investment is preferably transferred to capital reserve.