Page 94 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Unit 5: Internal Reconstruction of Companies

Solution notes

Journal of aBc ltd.
Date particulars l.f. ` `
Equity Share (` 10) Capital Account Dr. 10,00,000
To Equity Share Capital (New) Account 4,00,000
To 10% Preference Share Capital Account 80,000
To 7% Debentures Account 1,20,000
To Reconstruction Account 4,00,000
(Being issue of equity shares, preference shares and debentures
in lieu of present holdings)
Reconstruction Account Dr. 4,00,000
To Goodwill Account 3,00,000
To Plant & Machinery Account 50,000
To Freehold & Leasehold Premises A/c 50,000

(Being utilization of capital reduction in writing off goodwill,
over-valuation of plant & machinery and premises)
Bank Account Dr. 1,00,000
To 6% Debentures Account 1,00,000
(Being issue of 6% debentures to the public)
Illustration 6
The balance sheet of the Bhagwan Company Limited as on 31 March, 2006 was given below:
st
liabilities ` assets `

Authorised Capital: Patents at cost 4,25,000
5,000 Preference shares of ` 100 each. 5,00,000 Leasehold Premises 65,400
5,000 Equity shares of ` 100 each. 5,00,000 Plant & Machinery 21,100
10,00,000 Sundry Debtors 38,250
Stock 27,500
Issued Capital: Discount on issue of shares 9,000
3,750 Preference shares of ` 100 Preliminary Expenses 6,000
each fully paid up 3,75,000 P & L A/c 57,500
2,500 Equity shares of ` 100 each Cash 250
fully paid up. 2,50,000
Sundry Creditors 15,000
Bank Overdraft 10,000
6,50,000 6,50,000
The company proved unsuccessful and the following scheme of reconstruction is passed:
(i) ` 100 Preference Shares to be reduced to an equal number of fully paid shares of ` 50
each.

(ii) ` 100 Equity Shares be reduced to an equal number of fully paid shares of ` 25 each.

lovely professional university 89