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Redemption of preference shares
Accountancy
Why is it that the already existing amount in the CRR can't be used for redemption of preference shares and why is there a need for us to credit the CRR with the whole amount still required (after exhausting the amount received in fresh issue of shares)? Like in the given question (Illustration 9): We still need 2750000 to redeem the pref.shares(after using fresh issues) and we already have 2000000 in the CRR.....and why is there a need for us to still credit it by 2750000?
Answers (7)
Best Answer
CRR is created at the time of redemption of preference shares to maintain the capital structure of the company. When you payback the preference capital your capital decreases. So to maintain that we create crr out of general reserve or P&L. The existing CRR is irrelevant.
Thread Starter
Jason DanielAnd the remaining 750000 can be credited to the CRR right?
Sorry for late response. It's 27,50,000 is to be credited to CRR.
Shankara Vel
Sorry for late response. It's 27,50,000 is to be credited to CRR.
It's alright....that was asked by me before you clarified the doubt...I understood it.Thanks!
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