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why we transfer DRR to General …

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why we transfer DRR to General reserve..?

Posted by Sagar Chauhan 8 years, 2 months ago

CBSE > Class 12 > Accountancy

1 answers

Naveen Sharma 8 years, 2 months ago

On the issue of debentures, it is a mandatory requirement for companies to transfer the specific amount to Debenture Redemption Reserve(DRR). DRR is created out of profits of a company and is debited to statement of profit and loss(which means profit is reduced). Now, at the time of redemption of debentures, DRR is to be transferred to general reserve to give effect to earlier reduction in profit. So, DRR account is closed by transfer to general reserves which means same as increase in profits.

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