About capital redemption reserve

This query is : Resolved

CA Shyam Agarwal (Querist)
Follow

14 October 2013 If a co. wants to buy back 100000 equity share of rs. 10 each. for this purpose co. issued 2000 debenture @100 each and preference share 5000 @ 100 each. then plz tell from what amount we will create CRR.

CA Pallav Singhania

CA Pallav Singhania (Expert)
Follow

14 October 2013 Where a company purchases is on shares out of free reserves then a some equals to the nominal value of the shares so purchased shall be transferred to the capital Redemption reserve amount and details of such transfer shall be disclosed in the balance sheet.

In your case Rs.3,00,000 will be transferred to CRR...

Message likes : 1 times

CA Shyam Agarwal

CA Shyam Agarwal (Querist)
Follow

14 October 2013 thank u aryan now if I change my question that if i want of redeem 100000 pref. share @ 10 each then what your ans.

Upgrade to CAclubindia Pro. Subscribe Now!

CA Pallav Singhania

CA Pallav Singhania (Expert)
Follow

14 October 2013 Redemption at par..

Redeemable Prep share Capital A/c. Dr. 10,00,000
To Prep share Holder 10,00,000

Prep shareholder A/c Dr. 100000
To Bank 100000

CA Shyam Agarwal

CA Shyam Agarwal (Querist)
Follow

14 October 2013 what will be the amount of CRR

CA Pallav Singhania

CA Pallav Singhania (Expert)
Follow

14 October 2013 You can utilise the CRR balance for writing off the premium on redemption of preference shares..
Instead of debiting P/L, U can dr CRR..

Ins intead of redeeming at 10 if you have redeemed it at 110..

then the entry would as follows..

Redeemable Prep share Capital A/c. 10,00,000
Premium on redemption A/c. 1,00,000
To Prep shareholder 11,00,000

Prep shareholder A/c 11,00,000
To Bank 11,00,000

Adjustment of premium

CRR 100000
To Premium on redemption 100000

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
Follow

15 October 2013 Agreed with Aryan.

CA Shyam Agarwal

CA Shyam Agarwal (Querist)
Follow

15 October 2013 aryan as u told that we will create CRR with 300000 but in CS Scanner issue of debenture is not considered fresh issue.
fact is we can buy back or redeem by fresh issue of share or from free reserve and surplus.. then why we consider the issue of debenture as a fresh issue.

Upgrade to CAclubindia Pro. Subscribe Now!

CA Pallav Singhania

CA Pallav Singhania (Expert)
Follow

15 October 2013 Sources of Buy Back Section 77B provides three sources to Buy Back its own shares or other specified securities out of three sources:
Free reserves

Securities premium account

Proceeds of an earlier issue of shares or other specified securities.

[Section 77A(l), The Company's Act 1956]. Buy back of any kind of shares is not allowed out of the proceeds of any earlier issue of the same kinds of shares.

In such a case buy back generally done with the proceeds of Equity or Prep shares..