Question

What is lumpsum payment method of redemption of debenture?

Hint:

“Lumpsum” = balloon payment at maturity; prepare cash/funds in advance.

Answer 1

Step 1: Define.
Under the \emph{lumpsum} (single payment) method, the company repays principal (plus any premium) in one go at maturity rather than through periodic instalments or purchase in the open market.
Step 2: Accounting idea.
No reduction in outstanding liability occurs until the redemption date; funds are usually accumulated (e.g., via Debenture Redemption Reserve/Investments as per law or policy) to meet the balloon payment.
Step 3: Contrast.
Differs from \emph{draw of lots/instalment} method (redeemed gradually) and \emph{conversion/open-market purchase}.
Final Answer: \[ \boxed{\text{One-time repayment of entire debenture liability at a fixed maturity date}} \] % Quciktip