The balance of Debenture Sinking Fund is finally transferred to

The correct answer is: D. Capital Reserve

A debenture sinking fund is a fund that is set up to repay a company’s debentures. The fund is usually invested in safe, fixed-income securities, such as government bonds. The interest earned on the investments is used to pay down the debentures.

When the debentures are fully repaid, the balance of the sinking fund is transferred to the company’s capital reserve. This is because the sinking fund is considered to be a part of the company’s capital.

The other options are incorrect because:

• Option A: Profit and Loss account is a temporary account that is used to record the company’s income and expenses for a particular period. The balance of the Profit and Loss account is transferred to the Balance Sheet at the end of the accounting period.
• Option B: Debenture Redemption Fund investment account is a special account that is used to hold the investments that are made by the sinking fund.
• Option C: General Reserve is a reserve that is created to meet unexpected expenses or to provide a cushion against losses.

I hope this helps!