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Internal Reconstruction

Newly minted CA


My Queries:

1) How will we treat credit balance in Capital Reduction/Reconstruction account?

2) Should Patents & Copyrights be written off?

3) If not given in question, should we provide for intt. on debentures, pref. shares or not?

 

THANKS IN ADVANCE

 
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Article Trainee


Dear Singh,


1--  If any Credit Balance is left in the Capital Reduction A/c, it should be transferred to Capital Reserve A/c.


2--  Patents/ Copyrights/ any intangible asset will be written off only to the extent of Over valuation done.


3--  If specified in question, then only provide..


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Dear Faiz

Is it possible to have a Cr. Bal in capital reduction A/c ?


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Article Trainee


Originally posted by : dinesh

Dear Faiz

Is it possible to have a Cr. Bal in capital reduction A/c ?

At times it can come , depending upon Internal Reconstructions carried out. kindly see CA(PCC) Nov,2007 paper to get an idea about various adjustments on it.


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Newly minted CA


If transferred to Capital Reserve, it will have debit balance. So, will it be shown on assets side????? Is it possible?

 

In some questions, they ask to bring in fresh equity to make up for that difference. 

 
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Hi Singh

 

It won't have debit balance. You'll transfer only to the extent of balance in Capital Reduction A/c. None of the court approvals can be obtained if the internal reconstructions are such that write downs by liability, capital are inadequate to cover up the losses.

 

Just visualize a Creditor to whom Rs.100 is payable (Credit Balance). Will you pay more than Rs.100? No. The same way, Capital Reduction will be transferred to Cap Res only to the extent of balance available.

 

Therefore, never will Capital Reserve on the Debit Side.

 

Rineesh


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Newly minted CA


thanks, sir

 
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Hi,,

Can capital reserve be use for reconstruction purpose there in old Balance sheet?

 
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plz help me. if in the question's balance sheet there is share premium account and the question is silent regarding write off. what to do ?

 

 
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