The correct answer is: C. Capital reserve A/c
When investment in private debentures is cancelled, the profit or loss is credited or debited to the capital reserve account. This is because the capital reserve account is a reserve account that is used to record gains or losses on the disposal of capital assets.
The other options are incorrect because they are not reserve accounts. The debenture redemption fund account is a fund that is used to repay debentures. The general reserve account is a reserve account that is used to record general gains or losses. The profit and loss account is a statement of financial performance that records all of the revenues and expenses of a company for a period of time.
Here is a brief explanation of each option:
- A. Debenture Redemption Fund A/c
The debenture redemption fund account is a fund that is used to repay debentures. Debentures are loans that a company raises from investors. The debenture redemption fund account is a sinking fund that is used to accumulate money to repay the debentures when they mature.
- B. General reserve A/c
The general reserve account is a reserve account that is used to record general gains or losses. Reserve accounts are accounts that are used to accumulate money for specific purposes. The general reserve account is a general purpose reserve account that can be used for any purpose.
- C. Capital reserve A/c
The capital reserve account is a reserve account that is used to record gains or losses on the disposal of capital assets. Capital assets are assets that are used in the business for more than one year. The capital reserve account is used to record gains or losses on the disposal of these assets.
- D. Any of the above A/c
The answer is not D, because the profit or loss on the cancellation of investment in private debentures must be credited or debited to the capital reserve account.