After the debentures are redeemed, the balance in the Sinking Fund Account is transferred to:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → general reserve
The Sinking Fund (Debenture Redemption Fund) is built up by setting aside profits every year. Once the debentures are redeemed, the purpose of keeping these profits aside is over, and the balance is a free revenue reserve again, so it is transferred to General Reserve.
Note: This question is from the pre-rationalised NCERT book. The topic is not there in the latest NCERT book (2026-27), but it is still in the CUET 2026 syllabus, so do not skip it.
NCERT (Pre-rationalised edition):
NCERT (Pre-rationalised edition):
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