Class 12 Accountancy Part 2 Chapter 1: Accounting for Share Capital (Issue of Shares) NCERT Solutions

Redemption of Debentures is essentially about closing out a company's borrowing once the debentures mature, but the "how" varies a great deal. A question might ask you to redeem at par, at a premium, or occasionally at a discount; set aside a Debenture Redemption Reserve or apply the sinking fund approach; buy debentures off the open market for cancellation; or convert them into fresh shares instead of repaying cash at all.

What makes this chapter tricky in exams is that two or three of these routes usually show up stitched into one question, not tested in isolation. The Accountancy Part 2 Chapter 2 Solutions Class 12 below walk through such combined numericals step by step, so you can trace exactly which account gets debited or credited at each stage of the redemption process.

Important Numericals: Redemption of Debentures Class 12 NCERT Solutions

The following solutions cover important numerical questions from Chapter 2. Use them to revise the accounting treatment and check your approach after attempting each question yourself.

Question 1

Anand Ltd issued 20,000, 9% Debentures of Rs. 100 each. The company decided to transfer 25% of the face value of debentures to Debenture Redemption Reserve before redemption. Pass the journal entry for the transfer.

Solution:

Face value of debentures:
= 20,000 × Rs. 100 = Rs. 20,00,000

Amount to be transferred to DRR:
= 25% of Rs. 20,00,000 = Rs. 5,00,000

Journal Entry:

Answer: Debenture Redemption Reserve created = Rs. 5,00,000.

Question 2

Vaibhav Ltd redeemed 10,000, 8% Debentures of Rs. 100 each at par by converting them into Equity Shares of Rs. 10 each issued at a premium of Rs. 25 per share. Calculate the number of equity shares issued and pass the journal entries.

Solution:

Amount payable to debenture holders:
= 10,000 × Rs. 100 = Rs. 10,00,000

Issue price per equity share:
= Rs. 10 + Rs. 25 = Rs. 35

Number of equity shares to be issued:
= 10,00,000 ÷ 35 = 28,571 shares (approx.), rounded down to 28,571 shares

Value covered:
= 28,571 × Rs. 35 = Rs. 9,99,985 (balance of Rs. 15 adjusted through Securities Premium or paid in cash as per company policy)

Journal Entries:

Answer: 28,571 equity shares issued in conversion.

Question 3

Karishma Ltd had 5,000, 10% Debentures of Rs. 100 each due for redemption at a premium of 5%. Debenture Redemption Reserve had a balance of Rs. 1,50,000. Pass the journal entries for redemption, assuming the amount was paid through the bank.

Solution:

Face value:
= 5,000 × Rs. 100 = Rs. 5,00,000

Premium on redemption:
= 5% of Rs. 5,00,000 = Rs. 25,000

Total amount payable:
= Rs. 5,25,000

Journal Entries:

Answer: Total amount paid on redemption = Rs. 5,25,000.

Question 4

Suhana Ltd purchased its own 500, 9% Debentures of Rs. 100 each from the open market for immediate cancellation at Rs. 96 per debenture. Pass the journal entries.

Solution:

Face value of debentures purchased:
= 500 × Rs. 100 = Rs. 50,000

Purchase price:
= 500 × Rs. 96 = Rs. 48,000

Profit on cancellation:
= Rs. 50,000 − Rs. 48,000 = Rs. 2,000

Journal Entries:

Answer: Profit on cancellation transferred to Capital Reserve = Rs. 2,000.

Question 5

Digvijay Ltd issued 8,000, 10% Debentures of Rs. 100 each at par, redeemable at a premium of 10% after five years. Pass the journal entry at the time of issue, showing the loss on issue of debentures.

Solution:

Face value:
= 8,000 × Rs. 100 = Rs. 8,00,000

Premium payable on redemption:
= 10% of Rs. 8,00,000 = Rs. 80,000

Journal Entries:

Answer: Loss on Issue of Debentures = Rs. 80,000, to be written off over the life of the debentures.

Question 6

Falguni Ltd had 6,000, 9% Debentures of Rs. 100 each outstanding. The company decided to redeem 40% of the debentures out of profits and the remaining 60% out of a fresh issue of shares. Calculate the amount transferred to DRR and the amount raised through the fresh issue.

Solution:

Total face value:
= 6,000 × Rs. 100 = Rs. 6,00,000

Debentures redeemed out of profits:
= 40% of 6,000 = 2,400 debentures = Rs. 2,40,000

Debentures redeemed out of fresh issue:
= 60% of 6,000 = 3,600 debentures = Rs. 3,60,000

As per the Companies (Share Capital and Debentures) Rules, DRR is required at least to the extent of the face value of debentures being redeemed out of profits:
= Rs. 2,40,000 (or as per the applicable percentage prescribed for the company)

Answer: Amount transferred to DRR = Rs. 2,40,000; amount raised through fresh issue = Rs. 3,60,000.

Question 7

Neelkamal Ltd redeemed 4,000, 8% Debentures of Rs. 100 each at a premium of 6% by draw of lots. Investments of Rs. 3,00,000 held for this purpose were realised at Rs. 3,10,000. Pass the journal entries for realisation of investments and redemption.

Solution:

Face value:
= 4,000 × Rs. 100 = Rs. 4,00,000

Premium on redemption:
= 6% of Rs. 4,00,000 = Rs. 24,000

Total amount payable:
= Rs. 4,24,000

Profit on realisation of investments:
= Rs. 3,10,000 − Rs. 3,00,000 = Rs. 10,000

Journal Entries:

Answer: Profit on realisation of investments = Rs. 10,000; total redemption amount = Rs. 4,24,000.

Question 8

Ojasvi Ltd had 3,000, 12% Debentures of Rs. 100 each due for redemption. The company redeemed them at a premium of 4%, drawing on Securities Premium already standing in the books to meet the premium payable. Pass the journal entries.

Solution:

Face value:
= 3,000 × Rs. 100 = Rs. 3,00,000

Premium on redemption:
= 4% of Rs. 3,00,000 = Rs. 12,000

Journal Entries:

Answer: Premium on redemption of Rs. 12,000 met out of Securities Premium.

Question 9

Trisha Ltd issued 12,000, 9% Debentures of Rs. 50 each at a discount of 5%, redeemable at par after four years. Pass the journal entry at the time of issue, showing the discount on issue of debentures.

Solution:

Face value:
= 12,000 × Rs. 50 = Rs. 6,00,000

Discount on issue:
= 5% of Rs. 6,00,000 = Rs. 30,000

Net amount received:
= Rs. 6,00,000 − Rs. 30,000 = Rs. 5,70,000

Journal Entries:

Answer: Discount on Issue of Debentures = Rs. 30,000.

Question 10

Manvi Ltd had 15,000, 7% Debentures of Rs. 100 each outstanding on April 01. The company redeemed all the debentures on the same date at par by converting them into 10% Preference Shares of Rs. 100 each issued at par. Pass the journal entries.

Solution:

Amount payable to debenture holders:
= 15,000 × Rs. 100 = Rs. 15,00,000

Number of preference shares to be issued at par:
= 15,00,000 ÷ 100 = 15,000 shares

Journal Entries:

Answer: 15,000, 10% Preference Shares of Rs. 100 each issued in conversion.

Redemption of Debentures Class 12 NCERT Solutions PDF

If you want to revise all the selected solutions together, you can use the Part 2 Chapter 2 Accountancy Solutions PDF. Download the PDF and refer to the detailed solutions while practising the chapter.

How to Use Chapter 2 Accountancy NCERT Solutions for Revision?

Solving the questions yourself before checking the solutions can make your revision more useful.

• Attempt Before Checking: Try each numerical on your own before referring to the solution.

• Check the Adjustments: Pay attention to how goodwill, revaluation, reserves, and other adjustments are treated.

• Understand the Working Notes: Do not skip the calculations used to arrive at the final amount.

• Review Your Mistakes: Compare your working with the solution and identify where your approach differed.

• Practise Similar Questions: After understanding a solution, attempt another question based on the same concept.

Practising important numericals can help you understand how DRR, premium, and conversion are combined in Redemption of Debentures questions.

Use the Chapter 2 Redemption of Debentures Solutions to check your calculations, understand the working steps, and revise the chapter before your exams.