Out of ₹ 10,00,000 6% Debentures outstanding on 1st April, 2022, ₹ 5,00,000. Debentures were redeemed on 31st October, 2022. The balance of Debenture Sinking Fund Account on 1st April, 2022 was ₹ 10,00,000. Interest on d

Dealing with Debenture Sinking Fund Account Balance: At the time of redemption of debentures, the balance in the Debenture Sinking Fund Account (also known as Debenture Redemption Reserve) is transferred to the General Reserve Account. This is because the purpose for which the fund was created (redemption of debentures) has been fulfilled, and the accumulated profits are now free for general use by the company. Journal Entry for Transfer of Debenture Sinking Fund Account Balance: On 31st October, 2022, redemption of Debenture of ₹ 5,00,000. Particulars Dr. (₹) Cr. (₹) Debenture Sinking Fund A/c 5,00,000 To General Reserve A/c 5,00,000 (Amount transferred on redemption of debenture) Amount of Interest Paid on Debentures at Redemption: The interest on debentures is paid each year on 31st March. The redemption happened on 31st October, 2022. Therefore, interest needs to be calculated for the period from 1st April, 2022, to 31st October, 2022 (7 months) on the redeemed debentures. Amount of Interest = ₹ 5,00,000 × 6% × (7/12) = ₹ 17,500