The Debenture Redemption Reserve (DRR) is a mandated measure set up by the RBI to protect investors in the event of a payment failure.
Every business needs financial resources to keep and grow, and there are various ways for companies to secure funds. Besides utilizing the owner's capital, companies can raise funds through debt by offering debentures or getting loans. Debt financing involves the redemption of debentures, showing that these financial instruments can be fully returned once their term ends, settling any remaining debts to debenture holders or lenders who made loans.Journal Entry:
Debentures Account Dr. To Bank Account (Being the amount paid on redemption of debentures)Journal Entry:
Profit and Loss Appropriation Account Dr. To Debenture Redemption Reserve AccountAlso Check: Scope of Financial Management
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