Page 132 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Unit 5: Redemption of Preference Shares

Bank Account Dr. 22,50,000 Notes
Discount on Issue of Shares Account Dr. 2,50,000
To Equity Share Capital Account 25,00,000
(Being receipt of amount from issue of shares at discount)
Profit and Loss Account Dr. 2,50,000
To Capital Redemption Reserve Account 2,50,000
(Being utilisation of profit for the redemption of preference shares)
Preference Shareholders Account Dr. 25,00,000
To Bank Account 25,00,000
(Being payment made to shareholders on redemption of preference
shares)
(vi) 7% Redeemable Preference Shares Capital Account Dr. 2,00,000
Premium on Redemption Account Dr. 20,000
To Preference Shareholders Account 2,20,000
(Being amount due to shareholders on redemption of preference
shares)
Profit and Loss Account Dr. 2,20,000
To Premium on Redemption Account 20,000
To Capital Redemption Reserve Account 2,00,000
(Being utilisation of profit for redemption of Pref. Capital and
premium thereon)
Preference Shareholders Account Dr. 2,20,000
To Bank Account 2,20,000
(Being payment made to shareholders on redemption of Pref. Shares)

Self Assessment

Fill in the blanks:
12. There is a lot of controversy and confusion over the term proceeds of a …………… .

Choose the answer:
13. Capital Redemption reserve account is created:

(a) Voluntarily
(b) To meet the legal requirements

(c) Out of Capital reserve
(d) Out of share premium

14. Bonus shares can be issued from:
(a) Capital redemption reserve

(b) Profit on sale of fixed assets
(c) Development reserve

(d) Employees' deposit

LOVELY PROFESSIONAL UNIVERSITY 125