Page 125 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Date Particulars L.F. ( ) ( )
Accounting for Companies-I
Bank Account Dr. 10,000
To Call-in-Arrear Amount 10,000
(Being the receipt of calls-in-arrear)
Notes 12% Redeemable Preference Share Capital Account Dr. 12,50,000
Premium on Redemption Account Dr. 75,000
To Preference Sharesholders Account 13,25,000
(Being amount due to preferences shareholders on redemption of
preference share on premium)
General Reserve Account Dr. 4,00,000
Profit & Loss Account Dr. 2,96,365
To Capital Redemption Reserve A/c 6,96,365
(Being profit and general reserve utilised for redemption of
preference shares)
Share Premium Account Dr. 75,000
To Premium on Redemption Account 75,000
(Being the utilisation of share premium for writing off the premium
on redemption.)
Bank Account Dr. 5,53,680
Discount on Issue of Share Account Dr. 61,520
To Equity Shares Capital Account 6,15,200
(Being the receipt of the proceeds from the issue of 6,152 shares of
100 each at 10% discount.)
Preference Shares’ Dividend Account Dr. 1,44,800
To Bank Account 1,44,800
(Being payment made of declared preference dividend)
Preference Shareholders’ Account Dr. 13,25,000
To Bank Account 13,25,000
(Being payment made to preference shareholders on redemption)

Working Note:
1. It is assumed that calls-in-arrear of 10,000 on 100 shares have been received.
2. Total amount required for redemption ( )

Face value of preference shares 12,50,000
Less: Divisible profits available (4,00,000 + 2,96,365) = 6,96,365
Minimum amount of new shares
Which will be issued at discount 5,53,635

5,53,635 × 100
Face value of new shares = = 6,15,150
90
No friction of shares is allowed therefore total
No. of shares issued will be 6,152 of 100 each.

3. It is assumed that company has sufficient cash to pay the preference dividend and to
redeem the preference shares.

Example 7: Redemption of Preference Shares with Unpaid Calls Out of Fresh Issue at
Discount

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