debenture redemption reserve

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A capital reserve into which amounts are transferred from the profit and loss account for debentures that are redeemable at a future date. The aim is to limit the profits available for distribution, although the reserve does not provide the actual funds for redeeming the debentures. To provide these funds a periodic sinking-fund payment needs to be made to a debenture-redemption reserve fund, matched with investments earmarked for the fund.

Subjects: Accounting.

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