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CS Executive · Corporate Accounting and Financial Management · Related Aspects of Company Accounts

According to Section 71 of the Companies Act, 2013 as given in the official text, the amount credited to the debenture redemption reserve account may be used by the company only for:

The debenture redemption reserve can be used only for redeeming debentures. It is created out of profits available for dividend, and the Act bars any other utilisation, so it cannot fund dividends, bonus shares or writing off expenses.

  1. APaying dividend to equity shareholders
  2. BIssuing fully paid bonus shares
  3. CRedemption of debenturesCorrect
  4. DWriting off preliminary expenses

Explanation

Section 71(4) requires the company to create a debenture redemption reserve out of profits available for payment of dividend, and states the amount credited shall not be utilised except for the redemption of debentures. Bonus shares apply to the capital redemption reserve under Section 55(4), not the DRR.

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