Is Profit & Loss A/c (Cr. balance) a free reserves??? Kindly explain with logic??
8 Replies
Aravind..
(CA)
(1262 Points)
Replied 08 August 2010
yes. profit and loss a/c , credit balance, is a free reserve as it can be used for dividend distribution or any other purpose.
Faiz Ahmed
( Article Trainee)
(1731 Points)
Replied 08 August 2010
Ok Aravind, Tell me whether its(p&l A/c Cr. Balance) used in capitalisation process or not??
Faiz Ahmed
( Article Trainee)
(1731 Points)
Replied 08 August 2010
I mean can it be used for making partly paid up shares fully paid up and making issue of bonus shares
I am doing some sums, there they are not using it. I am unable to get the concept for it.
Faiz Ahmed
( Article Trainee)
(1731 Points)
Replied 08 August 2010
Congrats Arvind for clearing IPCC. I want you to tell me about how to go through for group2 papers . Tell me in relation to strategy, books to be used, time required to prepare for group2 etc.
Aravind..
(CA)
(1262 Points)
Replied 08 August 2010
you can use profit and loss credit balance, securities premium and the capital profit portion of capital reserve can be used for conversion of partly paid up shares into fully paid shares...
Savita
(CA Final)
(141 Points)
Replied 16 August 2010
Sources for bonus issue:
For converting partly paid up shares into fully paid up shares:-
1. Capital reserves relised in cash( i.e. not by revaluation of assets etc), 2.General reserve 3.Other free reserves(i.e. reserves not created for specific purpose) and 4.Cr. balance in Profit and loss A/c
For issuing bonus shares to already fully paid up shares Capital redemption reserve and securities premium relised in cash are first utilised and then above 4 are utilised if reqd.
While considering both the above points preference should be given to the sequence in which they are mentioned (my observation from solving ques.)
anuj
(Auditor)
(22 Points)
Replied 07 January 2011
So do you mean we can convert partly paid shares held by the promoters to fully paid by utilizing the balance in accumulated profits.???
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