Page 127 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

( )
Particulars
( )
Date

Dr.
45,000
Premium on Redemption Account

To Preference Shareholder Account

(Being amount due to preference share-holders on redemption of

preference shares with 20% premium)
30,000

Dr.
Share Premium Account

15,000
Dr.
Profit and Loss Account
45,000

To Premium on Redemption Account

(Being utilisation of share premium and profit in writing off the

premium on redemption of preference shares)
Profit and Loss Account

Dr.
25,000

49,000

Reserve Fund Account
Dr.

74,000
To Capital Redemption Reserve Account

Jan., 1 10% Redeemable Preferences Share Capital Account Dr. L.F. 2,25,000 2,70,000
(Profits and reserve funds utilised for the redemption of preference
shares)
Bank Account Dr. 1,51,002
Accounting for Companies-I Discount on Issue of Shares Account Dr. 16,778
To Equity Share Capital Account 1,67,780
(Being fresh shares issued at 10% discount for the redemption of
preference shares)
Notes Bank Account Dr. 45,000
Profit and Loss Account Dr. 5,000
To investments account 50,000
(Being sale of investment and loss transferred to P/L A/c)
Preference Shareholders Account Dr. 2,55,000
To Bank Account 2,55,000
(Being the payment of 2,125 preference shareholders)

Balance Sheet of Sanjeev Limited
as on 1st January 2006
Liabilities ( ) Assets ( )
Share Capital: Fixed assets 3,25,000
Issued and Subscribed Investment 25,000
41,778 shares of 10 each fully paid 4,17,780 Stock 50,000
250; 10% Preference shares of 100 each 25,000 Debtors 1,25,000
Calls in arrear 20 per share 5000 20,000 Misc. Exps. 20,000
Reserve Fund 25,000 Bank Balance 42,502
Capital Fund Redemption Reserve Account 74,000 Discount on issue of shares 16,778
Current liabilities 52,500
Preference shareholders 15,000
6,04,280 6,04,280

Working Note:
1. Total amount required for redemption: ( )
Face value of preference shares 2,25,000
+ 20% premium on redemption 45,000
2,75,000
2. Sources available to write off premium on redemption:
Share premium account 30,000
Out of profits 15,000
45,000
3. Sources available for redemption of preference share capital
Profit available:
Balance of P & L Account 45,000
—Loss on sale of investment 5,000
40,000
—Amount utilised for premium on redemption 15,000
25,000
Reserve fund for redemption (74,000 – 25,000) 49,000
74,000
120 LOVELY PROFESSIONAL UNIVERSITY