Question

When preference shares are redeemed out of profits , otherwise available for dividend , the sum equal to the nominal amount of shares must be transferred to *

Answer 1

Answer:

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Answer 2

Answer:

To the extent that the preference shares are redeemed out of profits, Capital Redemption Reserve Account must be credited, debiting the profit and loss Account, general reserve or other accounts showing profits otherwise available for distribution of dividends.

Capital Redemption reserve account can be utilized for the issue of fully paid bonus shares to the members of the company. Only to the extent of nominal value of preference shares redeemed out of divisible profits should be transferred to CRR.