3 0 Profit or loss on redemption of debenture arises only on sale or cancellation; if debentures are purchased but not cancelled the total amount paid (minus the interest to the date of purchase) should be debited to Own Debentures Account and shown as investment in the Balance Sheet. On cancellation, the account will be credited and Debenture Account debited: the difference between the nominal value of the debentures cancelled and the amount standing to the debit on Own Debentures Account will be profit or loss on redemption of debentures. (ii) If debentures are straightway cancelled on purchase, the profit or loss on redemption of debentures will be ascertained by comparing (1) the nominal value of debentures cancelled, and (ii) the price paid less interest to the date of purchase (if the transaction is cum-interest). (i) In case the transaction is ex-interest, the interest to the date of transaction will be paid in addition to the settled price and hence profit on redemption will be nominal value minus the settled price. Illustration 2 The following balances appeared in the books of a company as on December 31, 2012: 6% Mortgage 10,000 debentures of 100 each: Debenture Redemption Reserve (for redemption of debentures) > 10, 42,000; Investment 25,28,000, 4% Government Loan purchased at par and 75,60,000, 3-1/2% Government paper purchased for 35,42,000. The Interest on debentures had been paid up to December 31, 2012. On February 28, 2013, the investments were sold at 90 and 787 respectively and the debentures were paid off at 101, together with accrued interest. Write up the ledger accounts concerned. The Debenture Redemption Reserve is non cumulative