Question

what is internal reconstruction? explain with examples.​

Answer 1

Answer:

Internal Reconstruction. • Meaning. It is an arrangement made by the companies whereby the claims of. shareholders, debenture holders, creditors and other liabilities are altered/ reduced, so that the accumulated loss are written off, asset are valued at its fair.

Answer 2

Answer:

Internal Reconstruction

• Meaning

It is an arrangement made by the companies whereby the claims of

shareholders, debenture holders, creditors and other liabilities are altered/

reduced, so that the accumulated loss are written off, asset are valued at its fair

value and the balance sheet shows the true and fair view of the financial

statement

• Forms of internal reconstruction

i. Re-organization or alteration of share capital

ii. Reduction of share capital and other liabilities

• Objectives of internal reconstruction

i. To resolve the problem of over-capitalization/ huge accumulated losses/

over valuation of assets

ii. When the capital structure of a company is complex and is required to

make it simple

iii. When change is required in the face value of shares of the company

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