Question

9. When Redeemable Preference shares are due for redemption, the entry passed is
a) Debit redeemable Preference Share capital a/c; Credit cash a/c
b) Debit Redeemable Preference share capital a/c; credit Preference share holders alc
c) Debit preference share holders a/c; credit cash a/c
d) Debit preference share holders a/c; credit capital reduction alc​

Answer 1

Answer:

The amount of capital reserve cannot be used for redemption of preference shares. vii) If the shares are redeemed out of undistributed profit , the nominal value of share capital, so redeemed should be transferred to Capital Redemption Reserve Account