Methods of redemption of debentures:
The methods of redemption of debentures are explained below:
(i) Redemption in lump-sum:
This implies that debentures are repaid to debenture holders in lump-sum (at once) after a specified period of time. The company pays the amount to the debenture holders in lump sum as per the terms of issue of such debentures.
Example 1: ABC Ltd. issued 10,000 10% debentures of Rs. 100 each at par. The debentures are redeemable at the end of 5 years out of capital. Pass the journal entry for such redemption.