Page 121 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Accounting for Companies-I

Notes Balance Sheet of Ding Dong Limited
as on 1st April, 2006
Liabilities ( ) Assets ( )
Authorised Shares capital: Fixed Assets:
3200, More 10% Preferences Shares of 100 each 3,20,000 Plant & Machinery 10,00,000
1,02,000 Equity Shares of 10 each. 10,20,000 Current Assets 2,93,650
( 6,00,000 – 3,06,350)
13,40,000
Issued, Subscribed, Called up and Paid up capital:
84,000 Equity Shares of 10 each fully paid up 8,40,000
Capital Redemption Reserve Account 2,80,000
Share Premium Account (35,000- 28,000) 7,000
Profit and Loss A/c (3,05,000 – 2,80,000) 25,000
10% Preference Shareholders (15 holders could not 1,650
be traced)
Creditors 1,40,000
12,93,650 12,93,650

Notes:
1. Amount belonging to 15 preference shareholders who could not be traced out, will be treated as current
liabilities (15 × 100 + 10%) = 1,650.
2. Inspite of being redemption of 10% preference shares, authorized share capital will not be changed
because redemption of preference shares is not treated as reduction of capital as per Companies Act.

Example 4: Redemption of Preference Shares out of the Proceeds of Fresh Issue of
Shares
The following extract of Asha Limited’s balance sheet, is given below:

Liabilities ( )
Authorised share capital: 70,00,000
Issued and subscribed:
3,00,000 Equity Shares of 100 each, fully paid up 30,00,000
10,000; 10% Redeemable Preference Shares of 100 each
90 called up and paid up 9,00,000
Capital Reserve 1,50,000
Share Premium 30,000
Profit on sale of fixed assets 3,20,000
Profit and Loss Account (credit) 1,00,000

The company decides to redeem all the preferences shares at a premium of 2%. For the specific
purpose of the redemption it issued 20,000, 12% preference shares of 50 each at a premium of
5%. The entire amount is being payable along with application. The whole issue is taken by
public. The redemption of 10% Redeemable Preference Shares is duly completed.
Journalise the above mentioned transactions in the books of Asha Limited.

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