is there any order for transfer of free reserves an amount equal to nominal value of shares bought back (if any one alone is not sufficent) to CRR in case follwing are given :
1. Sec. premium
2. Gen. reserve
3. P/L (Cr)
or we can assume as we wish?
14 Replies
Dintakurthi Tirumala
(CA FINAL)
(15994 Points)
Replied 22 September 2011
Yes first utilise sec.premium later general reserve and remaining balance amount finally to P&L A/C
OM SAI SRI SAI JAI JAI SAI
shreyans jain
(ABC)
(192 Points)
Replied 22 September 2011
@ TIRMULA
ANY SPECIFIC LOGIC/REASON BEHINED IT?
shreyans jain
(ABC)
(192 Points)
Replied 22 September 2011
im not getiing authenticated answers to my query, CA Final Students pls look into this some are saying sec.premium while others are saying gen. reserves should be utilized first
Pls give ur answers along with the reasons
ACCOUNTANT
(Student)
(559 Points)
Replied 22 September 2011
look at the reply in accounts session.......but still better u get confirmed about it with an expert
shreyans jain
(ABC)
(192 Points)
Replied 22 September 2011
@ Sweta
ya, i saw ur reply than only came up with the above post, because i thought u wr not sure...
Bhagatsingh
(Genral Accountant/Auditor)
(35 Points)
Replied 22 September 2011
Resources of Buy Back
A Company can purchase its own shares from
(i) free reserves; Where a company purchases its own shares out of free reserves, then a sum equal to the nominal value of the share so purchased shall be transferred to the capital redemption reserve and details of such transfer shall be disclosed in the balance-sheet or
(ii) securities premium account; or
(iii) proceeds of any shares or other specified securities. A Company cannot buyback its shares or other specified securities out of the proceeds of an earlier issue of the same kind of shares or specified securities.
shreyans jain
(ABC)
(192 Points)
Replied 22 September 2011
@ bhagat
U did not understand my question, im not asking about Sources..of buy back.
shreyans jain
(ABC)
(192 Points)
Replied 22 September 2011
I request not to give a fluke at it
Pls reply only if u are 100% sure & with Suitable reasons
Akansha
(student)
(92 Points)
Replied 23 September 2011
HEY SHREYANS..........as per sec 77A of COMPANIES ACT 1956,no specific order has been given ,regarding the transfer of d amount to CRR.
U CAN TRANSFER IT IN NE ORDER
ITS PURPOSE:-
THE AMT IS TRANSFERD 2 CRR JUST 2 KEEP D CAPITAL INTACT......SO IT DUS NT MATTER IN WCH ORDER Y TRANSFER D AMOUNT COS D REULTING OVERALL CAPITAL REMAINS INTACT,NO MATTER WCH ORDER U FOLLOW!!!
N CHILL YR EVN IPCC STUDNTS HAV A REPLY 2 DS QUERY.........
Souvik Kumar Ghosh
(CA Final)
(1368 Points)
Replied 23 September 2011
You should follow the sequence as specified by you.
Sec-78 of Companies Act has specified the limited purposes for which securities premium can be used among them one of which is to provide for buy back. But as regards to GR & P/L no such limited use is applicable. So it would be prudent & rational to first use those reserves which has limited uses (SP) rather than those which can be used for any purpose (GR, P/L). So it would be rational to use SP before GR & P/L.
With Regards,
SOUVIK
shreyans jain
(ABC)
(192 Points)
Replied 23 September 2011
@ Akansha
But both Sec. Prem. & gen reserves have different Uses & we are reducing the balance of them by Creating CRR, So dont you think that there must be some regulation regarding this
shreyans jain
(ABC)
(192 Points)
Replied 23 September 2011
@ Sovuik
Thanks Very Much Buddy,
After so many Replies i got one in which some logic was there, but iam wating for some other replies as well ,because when i posted this query in accounts section one CA was saying that Gen Reserve should be utilized First
Akansha
(student)
(92 Points)
Replied 23 September 2011
i agree wd at souvik says...........n u r also ryt i thnk so.........bt d prob is dat in law dre is no specific provison 4 it n i also thnk dar g/r shud b usd 1st...........as far as wt i hv read is cncrnd n rest lemme also no bout d final cnclusion of it
shreyans jain
(ABC)
(192 Points)
Replied 26 September 2011
Hey still no reply , pls final students, experts look into this as i want to know the conclusion
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