Internal Reconstruction - II PDF

INTERNAL RECONSTRUCTION - II T.Y.B.COM. – FINANCIAL ACCOUNTING  ACCOUNTING ENTRIES ◻ When shares are consolidated: Debit Share Capital A/c (Say Rs. 10) Credit Share Capital A/c (Say Rs. 100) ◻ When shares are sub divided: Debit Share Capital A/c (Say Rs. 100)...

INTERNAL RECONSTRUCTION - II T.Y.B.COM. – FINANCIAL ACCOUNTING  ACCOUNTING ENTRIES ◻ When shares are consolidated: Debit Share Capital A/c (Say Rs. 10) Credit Share Capital A/c (Say Rs. 100) ◻ When shares are sub divided: Debit Share Capital A/c (Say Rs. 100) Credit Share Capital A/c (Say Rs. 10)  ACCOUNTING ENTRIES ◻ When shares are converted into stock Debit Share Capital A/c Credit Share Stock A/c ◻ When shares are surrendered Debit Share Capital A/c Credit Share Surrender A/c ◻ When surrendered shares are converted into preference shares Debit Shares surrendered A/c Credit Preference Share Capital A/c  ACCOUNTING ENTRIES ◻ When recorded asset is disposed off: Debit Bank A/c Credit Asset A/c Note : Any profit or loss on sale should be transferred to Capital Reduction Account ◻ When an unrecorded asset is sold off: Debit Bank A/c Credit Capital Reduction A/c  ACCOUNTING ENTRIES ◻ When Reconstruction expenses are paid: Debit Capital Reduction A/c Credit Bank A/c ◻ When finance is raised by issue of shares Debit Bank A/c Credit Share Capital A/c ◻ When arrears of preference dividend are cancelled: No Entry  ACCOUNTING ENTRIES ◻ When arrears of preference dividend are settled by issue of deposit certificates/ cash/ shares Debit Capital Reduction A/c Credit Deposit Certificates/ Cash/ Share Capital A/c ◻ When new debentures are exchanged for old debentures Debit Old Debentures A/c Credit New Debentures A/c  ACCOUNTING ENTRIES ◻ When debenture holders take over some assets/ shares are issued to them : Debit Debentures A/c Credit Assets A/c Credit Share Capital A/c ◻ When preference share capital is exchanged for equity shares/ debentures: Debit Preference Share Capital Credit Equity Share Capital A/c Credit Debentures A/c  ACCOUNTING ENTRIES ◻ When the rate of preference dividend is increased Debit Preference Share Capital Credit Preference Share Capital ◻ When assets are taken over by loan/ creditors Debit Loan/ Creditors A/c Credit Asset A/c  Capital Reduction Account (Nominal Account) Dr. Cr. Particulars Amoun Particulars Amount t To By (Decrease in assets) (Increase in assets) (Increase in liabilities) (Decrease in liabilities) Losses & Expenses Profits & Incomes Total XXX Total XXX Note: Balancing figure is transferred to Capital reserve/ Goodwill account Assignment I ◻ Write Short notes (Five Marks) 1) Internal Reconstruction 2) capital reduction account 3) Methods of Internal reconstruction 4) Consolidation and Sub-division of shares 5) Alteration of Capital 6) Variation of shareholders rights 7) Reduction of share capital 8) Compromise and Arrangements 9) Need for Internal Reconstruction Assignment II ◻ Descriptive Questions (10 marks) 1) Distinguish between Internal and External reconstruction 2) What is Internal Reconstruction? Explain methods of Internal Reconstruction 3) Explain – Surrender of shares 4) Explain – Scheme of Internal Reconstruction Illustrations