Buy back of shares -extremely confused

mukesh (CA FINAL) (148 Points)

18 September 2013  

I am very much confused in these 2 entries of buy back..

1)   a) Equity share capital DR

            Loss on issue DR

            To equity share holder CR

          b)  Security Premuim DR

                 General Reserve DR

                 P/L DR

                 To loss on issue CR

2)             Free reserves DR

                 To CRR CR

 

 Now if the questions says that - The company decides to buy back 30000 equity shares at Rs 12/-. FOR THIS PURPOSE IT UTILISES THE SECURITY PREMUIM IN FULL AND GENERAL RESERVE TO THE EXTENT REQUIRED?

 

Now is it asking for adjustment of security premuim and general reserve in 1 (b) or (2) entry ??

 

Please don't just copy paste law language...Please explain me