Premium on redemption of preference shares

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Manoj Mangal (Querist)
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07 November 2008 A Public ltd. co. has issued 9% Non-Cum, optionally convertible Pref. shares, which is redeemable at 15% premium after 10 years.

The co.has started commercial production in 2007-08,so there is no profit in current year & no balance of accumulated reserves.

In the current year (2007-08), what will be accounting treatment in respect of Premium on remption of pref. shares.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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07 November 2008 Nothing.

Manoj Mangal

Manoj Mangal (Querist)
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07 November 2008 Why not 1/10 amount of premium on redemption on pref. shares should be charged through profit & loss A/c in current year?

Pl. explain in detail .....

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S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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08 November 2008 When there is no profit how and where from will you appropriate?

Manoj Mangal

Manoj Mangal (Querist)
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08 November 2008 Thanks a Lot