debenture redemption reserve

Quick Reference

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.

Reference entries