Page 106 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Unit 5: Internal Reconstruction of Companies

To Sundry Debtors A/c 30,000 notes
To Fixed Assets A/c 14,000
To Bank Account (Cost of Reconstruction) 3,350
(Being utilization of the amount of capital
reconstruction in writing off the accumulated losses,
fictitious assets and overvaluation of fixed assets)
Equity Share Capital A/c Dr. 3,00,000
To Reconstruction A/c 3,00,000*
(Being reduction in capital by reducing the value of
equity shares by ` 3 each)
Bank A/c Dr. 7,00,000

To Equity Share Capital A/c 7,00,000*
(Being amount received on calls @ ` 7 per share on
1,00,000 shares)
Note: The amount of reduction in equity capital of ` 3,00,000 is computed by the balance of reconstruction account and the
amount received on equity shares of ` 7,00,000 is computed by the bank account.

reconstruction a/c
particulars ` particulars `
To Pref. Dividend 33,600 By 8% Preference Capital 1,80,000
To P & L A/c 4,28,000 By Debenture-holders (Int.) 1,08,000
To Patents & Copyright 80,000 By Bank (Int.) 7,500
To Investments 10,000 By Sundry Creditors 3,450
To Sundry Debtors 30,000 By Balance (Equity shareholders) 3,00,000
To Fixed Assets 14,000
To Bank (Exps.) 3,350
5,98,950 5,98,950

Bank a/c
particulars ` particulars `
By Bank Overdraft including interest 1,57,500
To Equity Share Capital 7,00,000 By Preference Shareholders 4,53,600
By Sundry Creditors 65,550
By Reconstruction (Expenses) 3,350
By Cash Retained for Working Capital. 20,000
7,00,000 7,00,000

Balance sheet of xyZ industries ltd. (after reconstruction)
(as on 30 June, 2006)
th
liabilities ` assets `
Share Capital: Fixed Assets 11,06,000
Issued & Subscribed Investments 55,000

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