Shivraman.V (CA) (33 Points)
08 October 2010i think a thing like this is done in internal reconstrucion ,when a companies position goes really really bad and the shareholders think that they have to keep the co. alive they surrender some of their shares reducing the share capital liability of company,when the shareholders surrender their shares,it means the co. dont have to pay dividend on the surrendered shares and with the amount it saved ,the co. writes off its priliminary expenses,miscellenous or share issue expenses
ARCHNA
(Student)
(160 Points)
Replied 10 October 2010
yea its possible, ths is case of internal reconstruction.
1. Entry for reduction in share capital will be
A. Share capital a/c dr.
To share capital A/c
To Capital Reduction A/c
( This entry is wn u r reducing the face value of share)
or
B. Share capital a/c dr.
To Capital Reduction A/c
( This entry is wn u r reducing the Paid up value of share only)
2. just u said for adjusting the same with assets, then u pass the following entry also
Capital reduction A/c Dr.
To Asset A/c
u cn also pass one entry for above by cancelling capital reduction A/c (Like Share Capital A/c Dr.
To Asset A/c)
CAclubindia
