What are the sources of redemption of debentures?
Sources of Funds for Redemption of Debentures:
- Redemption of Debentures out of Capital:
- Redemption of Debentures out of Profits:
- I. Redemption of Debentures in Lump-sum at Maturity:
- II. Redemption of Debentures by Draw of Lots:
- Recognition of the Liability under the Equity Warrant Exercisable by the Investor:
What is issue and redemption of debentures?
When the debentures are issued at a price less than its par value (or the face value) and redeemed at a price higher than its par value, then it is termed issue of debenture at discount and redeemable at premium. The difference between the issue price and the redemption price is considered loss on issue of debenture.
What is redemption of debentures by conversion?
The debentures may be redeemed by converting them into equity shares as per the terms of their issue. This implies that the debentures will be redeemed by conversion only if they were issued as such and no cash outflow will take place and hence, there is no requirement of creating Debenture Redemption Reserve.
What is meant by redemption of debentures out of profit?
The company withholds a part of divisible profits for redeeming the debentures. The payment to debentureholders in such a case is out of profit earned in the course of the business and therefore it is termed as redemption out of profits. …
How is redemption of debentures calculated?
Profit or loss on cancellation will be calculated by comparing the purchase price of debentures cancelled with this face value plus the premium payable on redemption according to the terms of the issue. Suppose, a company issues debentures of Rs 100 each redeemable at a premium of 5%.
What are methods of redemption?
Methods of Redemption Reserve
- Payment in lump-sum on the debenture’s maturity.
- Payment in instalments after the maturity date.
- Redemption through the purchase of the debenture on the market.
- Redemption through the conversion of debentures into new debentures or equity shares.
What are the types of debentures available?
The major types of debentures are:
- Registered Debentures: Registered debentures are registered with the company.
- Bearer Debentures:
- Secured Debentures:
- Unsecured Debentures:
- Redeemable Debentures:
- Non-redeemable Debentures:
- Convertible Debentures:
- Non-convertible Debentures:
What is interest on debenture?
Interest on Debentures is a charge against the profit of the company. We calculate Interest on Debentures at a fixed rate of interest on the nominal value. If the amount of interest accrued and due is not paid, it is known as Interest Accrued and Due or Interest Outstanding.
How many types of debentures are on the basis of redemption?
Secured and Unsecured, Registered and Bearer, Convertible and Non-Convertible, First and Second are four types of Debentures.
Can we redeem debentures at discount?
No, debentures issued at premium or par cannot be redeemed at discount because redemption of debentures at discount implies that the debentureholders are getting lesser than what they have earlier invested at the time of issue.
What do you mean by redemption of debentures?
Redemption of debentures means payment of the amount of debentures by the company. When debentures are redeemed, liability on account of debentures is discharged. Amount of funds required for redemption of debentures is quite large and, therefore, prudent companies make sufficient provision out of profits and accumulate funds to redeem debentures.
What is the meaning and definition of redemption of debenture?
Redemption of Debentures is defined as the settlement of borrowed funds by a company or a firm to their debenture holders after the date of maturity. After the funds are repaid, the liability on the debenture account is discharged. To have a more fundamental understanding of the Redemption of Debentures Meaning : (Images to be uploaded soon)
What are redeemable debentures?
redeemable debenture. Agreement under which a firm issuing a debenture agrees to repay the borrowed sum on a specified date or after a specified period of notice.
What is redeemable debenture?
A Redeemable Debenture is one that is subject to repayment by the company to the debenture holder. The debenture may be repayable in lump sum on the date of maturity. The debenture may also be repayable in instalments during the specified period or on the specified dates.