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Economics, Accounting & Business: Post your doubts here!

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why do you never give link to the paper? :p
Because after the debentures are redeemed, we wont have to deduct the interest from profit
hahaha...will give the link next tym.
anyways thanx...i forgot abt the intrest...and was thinking how debenture effects profit.
 
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OMG! You are right as per marks scheme but can you explain it.

Well because when you redeem debentures you don't have to pay interest...hence profit will increase as expenses will decrease...and net current assets will decrease because you paid of redeeming the debentures (cash outflow) =)
 
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I understood that but when a debenture is redeemed a redemption reserve is created so by redeeming aren't we not decreasing the profit as interest takes a small proportion of the net profit.
 
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I understood that but when a debenture is redeemed a redemption reserve is created so by redeeming aren't we not decreasing the profit as interest takes a small proportion of the net profit.

why do you even care about the redemption reserve....?? they asked for effect on profits and net current assets.... =) plus the transfer is done from the retained profits...not the current year's profit i guess!! =)
 
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I understood that but when a debenture is redeemed a redemption reserve is created so by redeeming aren't we not decreasing the profit as interest takes a small proportion of the net profit.
Profit decrease as part of it got transferred to the redemption account.
Nope. The Debenture Redemption Reserve are not created unless stated by the Directors to do so. They are not compulsory as the creation of Capital Redemption Reserve.
So unless the question mentions the creation of DRR, dont make it!
 
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Nope. The Debenture Redemption Reserve are not created unless stated by the Directors to do so. They are not compulsory as the creation of Capital Redemption Reserve.
So unless the question mentions the creation of DRR, dont make it!

This question can create a lot of debate as students may also take into account the redemption reserve.
 
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like in ordinary shares we divide share capital by its price to get the number of shares. Same is case here we divide $10000 by 10 to get the number of debenture notes issued.
But it doesn't say $10000 its 10000 $10 debentures, so doesn't that mean there are 10000 debenture certificates each worth $10?
 
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Okay people I think this is enough! We all require a good night sleep. Tomorrow's exam can be tricky. I recommend you all to look at the relevant IAS and theories related, not need to look at outdated question papers, 2009-11 will be enough . Best of luck to Everyone!
 
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Okay people I think this is enough! We all require a good night sleep. Tomorrow's exam can be tricky. I recommend you all to look at the relevant IAS and theories related, not need to look at outdated question papers, 2009-11 will be enough . Best of luck to Everyone!

It's still 8:30 here in dubai....and the exam is an afternoon one...:p
 
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