[amp_mcq option1=”Capital Reserve Account” option2=”General Reserve Account” option3=”Sinking Fund Account” option4=”Profit and Loss Account” correct=”option1″]
The correct answer is: A. Capital Reserve Account
A debenture is a long-term debt instrument issued by a company. The company borrows money from investors and promises to repay the loan with interest over a specified period of time. The Debenture Redemption Reserve Account is a fund that companies set up to ensure that they have enough money to repay their debentures when they come due.
When a company redeems its debentures, it transfers the balance of the Debenture Redemption Reserve Account to the Capital Reserve Account. The Capital Reserve Account is a type of reserve that companies can use to make capital expenditures, such as buying new equipment or expanding their business.
The other options are incorrect because:
- General Reserve Account is a type of reserve that companies can use to meet unexpected expenses or to make distributions to shareholders.
- Sinking Fund Account is a fund that companies set up to accumulate money to repay their debentures.
- Profit and Loss Account is a statement of a company’s income and expenses for a specific period of time.