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Buy Back of shares
Accountancy
What amount to be transfered to CRR if buy back is held by selling the investments for the whole amount of buy back ?
Answers (6)
Manoj Raj
No amount should be transfered... If we use free reserve sec. Premium for the purpose of buy back then only we have to transfer nominal value or shares to CRR account.
Yes in the question if they said investments are sold. That means buyback made from divisible profits only we should transfer to CRR
Manoj Raj
Please elaborate
If they said that investments are sold for the pupise of buyback. That means any new shares are not issuing for the purpose of buyback only we are using divisible profits or free reserves to make buyback. Thats y we have to transfer nominal value of shares to CRR
Manoj Raj
Please elaborate
Amount equal to face value of buy back has to be transferred to CRR account. This is because there is an obligation to fill the "capital gap" be creation of CRR which will later be used to issue bonus shares. Here when investments are sold the entry is Bank dr To investment But when fresh issue of shares are done the entry would be Bank dr To Equity share capital And if any balance capital gap remains it has to billed by creating CRR for the balance amount
