payment of reconstruction expenses is debited to ...
Answers
Answer:
An appreciation in the value of an asset or reduction in the amount of a liability should be debited to the account concerned and credited to Capital Reduction Account (or Reconstruction Account)
Reconstruction expenses will be debited to capital reduction a/c.
Explanation:
Internal reconstruction is a process by which a company writes off its losses out of sacrifices made by investors such as shareholders, financers or creditors. the process is carried through a nominal account in name of Capital Reduction A/c or Reconstruction A/c .
so in order to implement this scheme of internal reconstruction company may need to incur some expenses to perform the operations of internal reconstruction.
here is the entry that will be passed:-
Capital reduction a/c Dr. xx
To cash a/c xx