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Buy Back - Advanced Accounting
Accountancy
In material Illustration 3, For transferring to CRR account we have to take the nominal. Value of the equity shares bought right? If so, in this illustration I don't know how they mentioned 3 lakhs as a nominal value for CRR account instead of 5 lakhs
Answers (15)
Thread Starter
Manoj RajMeans The amount received from the issue of preference shares (200) is being used for the buy back of equity shares (500) through the amount available in Bank thus balance (500-200) has been transferred to CRR am I right?
Haa yes because that balance 300 is used from the free reserves
If the whole amount of buy back is received through Preference shares issue then we don't have to transfer to CRR ? Right? Only if we use free reserves for the buy back option then we have to transfer the nominal value of the shares bought back correct?
Thread Starter
Manoj RajIf the whole amount of buy back is received through Preference shares issue then we don't have to transfer to CRR ? Right? Only if we use free reserves for the buy back option then we have to transfer the nominal value of the shares bought back correct?
Right. We have to tranfer nominal value of share sonly if we used from free reserves otherwise no need
Another one doubt I have that is For calculating Maximum shares that can be bought back we have to do 3 test in that, Debt equity ratio should be 2:1 right for That debt calculation should we have to take only long term debts (secured as well as non secured) or Should we have to include current liabilities also?
Thread Starter
Manoj RajAnother one doubt I have that is For calculating Maximum shares that can be bought back we have to do 3 test in that, Debt equity ratio should be 2:1 right for That debt calculation should we have to take only long term debts (secured as well as non secured) or Should we have to include current liabilities also?
We have to include both long-term and short-term laibilities
Thread Starter
Manoj RajIs this ratio same as we are taking in Financial ratios chapter in FM? Or is it for only accounting purpose
Sry i don't know I didint do ratios chapter in fm. But for buyback this is the ratio
Thread Starter
Manoj RajAnother one doubt I have that is For calculating Maximum shares that can be bought back we have to do 3 test in that, Debt equity ratio should be 2:1 right for That debt calculation should we have to take only long term debts (secured as well as non secured) or Should we have to include current liabilities also?
Debt does not include current liabilities.
CA Suraj Lakhotia Admin
Debt does not include current liabilities.
But it includes short term debts?? Is it Correct sir?
