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Preference shares
Accountancy
In illustration 6 In this question given redeem preference shares by UTILISATION OF RESERVE available free reserves as per qn=110000 We are redeeming @100000 rs then remaining reserves =10000 Then how can we create crr from free reserve???
Answers (13)
Best Answer
Thread Starter
Kanaga ManiThen book is wrong??? In qn only given by utilizing reserves redeem preference share,then what the entry for that? Book answer is wrong?
It's correct in the book. BoD decided to redeem the preference shares at par by utilisation of reserve - MEANING of this sentence is that funds which have already been accumulated in the company in the form of free reserves on Equity Side and Bank / Working Capital on Assets side are being used to redeem pref. shares. It's an indication that preference shares are redeemed not by any issue of fresh issue shares but through reserves. And this means, through existing funds.
Himanshu Somani
The balance of 10,000 left in free reserves is after transferring it to CRR so it will remain as it is in free reserves
How we are already redeemed at 100000 then where is balance for transferring 100000 to crr
Thread Starter
Kanaga ManiHow we are already redeemed at 100000 then where is balance for transferring 100000 to crr
Where do you think balance of free reserves i.e. General Reserves and Profit and Loss account here has gone?
Sahibdeep Singh
Where do you think balance of free reserves i.e. General Reserves and Profit and Loss account here has gone?
We issued for redemption from free reserves
Thread Starter
Kanaga ManiWe issued for redemption from free reserves
It's means it paid to preference share holders
Thread Starter
Kanaga ManiIt's means it paid to preference share holders
How paid? What would be entry?
Sahibdeep Singh
How paid? What would be entry?
Redemption a/c To preference share holders Preference share holders a/c To bank ( we paid to preference shares holders out of reserves)
Thread Starter
Kanaga ManiRedemption a/c To preference share holders Preference share holders a/c To bank ( we paid to preference shares holders out of reserves)
In the first entry, I assume you meant Pref. Share Capital To Pref. Shareholders So, where has Free Reserves Balance reduced?
Sahibdeep Singh
In the first entry, I assume you meant Pref. Share Capital To Pref. Shareholders So, where has Free Reserves Balance reduced?
Then book is wrong??? In qn only given by utilizing reserves redeem preference share,then what the entry for that? Book answer is wrong?
Thread Starter
Kanaga ManiThen book is wrong??? In qn only given by utilizing reserves redeem preference share,then what the entry for that? Book answer is wrong?
I assumed Profit and loss account 75000 General reserve account 25000 To bank 100000
Thread Starter
Kanaga ManiI got it sir tq
No worries, I could have shared it before. But wanted that you understand it through concepts and entries. Happy studying!
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