Question

Redemption of Preference Shares
The balance sheet of ABC & Co., Ltd. on 31.3.2009 stood as follows: Liabilities Rs. Equity shares of Rs. 100 each 9% redeemable preference shares of Rs. 100 cach Securities Premium Capital Reserve P&L A/C 10% Debentures Creditors 8,00,000 1,00,000 2,00,000 5,00,000 Rs. Assets 5,00,000 Fixed assets Investments 3,00,000|Bank balance 50,000 Other current assets 1,00,000 2,00,000 3,00,000 1,50,000 16,00,000 16,00,000 Both the redeemable preference shares and debentures were due for redemption on 1.4.2009. The company arranged for the following: (i) It issued 2,000 equity shares of Rs. 100 at a premium of 10%. (11) It sold the investments for Rs. 90,000 (iii) It arranged a bank overdraft to the extent necessary. The redemptions were carried out. Give entries for rdemption of preference shares and debentures and balance sheet after redemption.​

Answer 1

When Redeemable Preference shares are due for redemption, the entry passed is

C. debit preference shareholders a/c; credit cash a/c

D. debit preference shareholders a/c; credit capital reduction a/c