Question

The balance of ‘Sinking Fund Account’ after the redemption of debentures is transferred to:

• A. Profit & Loss Statement
• B. General Reserve A/c
• C. Sinking Fund A/c
• D. None of these

Hint:

After redemption, Sinking Fund balance is transferred to General Reserve, strengthening internal reserves of the company.

Answer 1

The Correct Option is B

Step 1: Concept of Sinking Fund.
A sinking fund is created out of profits for the redemption of debentures. The fund accumulates investments until redemption.
Step 2: Treatment after redemption.
Once debentures are fully redeemed, the sinking fund is no longer required. The balance is then transferred to General Reserve.
Step 3: Eliminate wrong options.
- (A) Profit & Loss Statement: incorrect, as reserve is not returned to P& L.
- (C) Sinking Fund A/c: already used up in redemption.
- (D) None: not correct.
Step 4: Conclude.
Thus, the correct answer is General Reserve A/c.
Final Answer: \[ \boxed{\text{General Reserve A/c}} \]