Basic query in accounting
This query is : Resolved
pavankumar
(Querist)
02 November 2013
Below is a item from Balance sheet of Srabanti Company limited
Liabilities Rs
Issued and Subscribed Capital:
5000, 7.5% Redeemable Pref.Shares 5,00,000
of Rs100 each
Assets Rs
Investments, at cost 3,00,000
(Market Value Rs2,80,000)
Given:On 1.1.1996,To finance the redemption,all the investments were sold at Market Price.
In the above context:
Q1)How investment transaction helps for Redemption of Preference shares? While solving problems I have not seen any cash which got due to sale of investment is utilized for payment of Preference shares.
I will be very much thankful to you.
Liabilities Rs
Issued and Subscribed Capital:
5000, 7.5% Redeemable Pref.Shares 5,00,000
of Rs100 each
Assets Rs
Investments, at cost 3,00,000
(Market Value Rs2,80,000)
Given:On 1.1.1996,To finance the redemption,all the investments were sold at Market Price.
In the above context:
Q1)How investment transaction helps for Redemption of Preference shares? While solving problems I have not seen any cash which got due to sale of investment is utilized for payment of Preference shares.
I will be very much thankful to you.
Nikhil Kaushik
(Expert)
02 November 2013
what you mean by "I have not seen any cash". It has been provided that investments were disposed of at market price. ie Rs 2.8 lakhs will come from the sale of investment. Rest needs to be taken out of from whatever cash you already had.
Cash/Bank Dr Rs 2.8 lakhs
To Investments Rs 2.8 lakhs
(Being investments sold)
Preference Shares A/c Dr Rs 5 lakhs
To Cash/ Bank A/c Rs 5 lakhs
Cash/Bank Dr Rs 2.8 lakhs
To Investments Rs 2.8 lakhs
(Being investments sold)
Preference Shares A/c Dr Rs 5 lakhs
To Cash/ Bank A/c Rs 5 lakhs
Message likes :
1 times
Nikhil Kaushik
(Expert)
02 November 2013
what you mean by "I have not seen any cash". It has been provided that investments were disposed of at market price. ie Rs 2.8 lakhs will come from the sale of investment. Rest needs to be taken out of from whatever cash you already had.
Cash/Bank Dr Rs 2.8 lakhs
To Investments Rs 2.8 lakhs
(Being investments sold)
Preference Shares A/c Dr Rs 5 lakhs
To Cash/ Bank A/c Rs 5 lakhs
Cash/Bank Dr Rs 2.8 lakhs
To Investments Rs 2.8 lakhs
(Being investments sold)
Preference Shares A/c Dr Rs 5 lakhs
To Cash/ Bank A/c Rs 5 lakhs
Message likes :
1 times
CA Pallav Singhania
(Expert)
02 November 2013
Bank A/c 280000
P/L A/c 200000
To Investment A/c 300000
{Investment sold at loss}
7.5 Prep share Capital A/c Dr. 500000
To Prep Shareholder A/c. 500000
{due Entry}
Prep Shareholder A/c. 500000
To Bank 500000
{Payment Entry}
If redemption done out of profit then CCR is to be created...
P/L A/c 200000
To Investment A/c 300000
{Investment sold at loss}
7.5 Prep share Capital A/c Dr. 500000
To Prep Shareholder A/c. 500000
{due Entry}
Prep Shareholder A/c. 500000
To Bank 500000
{Payment Entry}
If redemption done out of profit then CCR is to be created...
Message likes :
1 times
pavankumar
(Querist)
18 November 2013
Whether below statement is correct?
A company has no right to sales its Assets to redeem its Preference Shares.
Whether below statement is correct?
A company has no right to sales its Assets to redeem its Preference Shares.
Nikhil Kaushik
(Expert)
18 November 2013
it is correct statement. Refer proviso (a) to section 80 of the companies act 1956. redeemable preference shares can be redeemed only out of distributable profit.
Message likes :
1 times
Nikhil Kaushik
(Expert)
18 November 2013
or by issue of fresh shares.
Message likes :
1 times
CA Pallav Singhania
(Expert)
18 November 2013
I don't think its right.. selling asset for redemption of prep shares...
Message likes :
1 times
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Depreciation Chart Companies Act
- GST Audit whether Govt Companies are exempt?
- PTRC Show Cause Notice on Email
- Accounting treatment of AMC alongwith the purchase of Laptop
- Unable to File TDS Q2 Return – New TRACES Portal Error
- Issuing of delivery challan by seller of goods
- Transfer of Physical Stock Between Two Proprietorship Concerns
- MSME disclosure and disallowance
- Not ordinarily resident having partnership income in India and salary in USA is any form to filed be
- EPF ECR NEW RULES Sep 17th 2026
- GST Treatment of Purchases with GST Paid where Outward Supplies of Manufactured CattleFeed Exempt
- Expert Help Required for TDS Refund 100000 Through TRACES – AY 2022–23
- IMPORT PURCHASE ENTRY PASSED IN BOOKS OF ACCOUNT
- FAST DS 26 Undisclosed Foreign Asset Disclosure Scheme 2026
- Regime change
- Goods sold but invoice not issued
- Tally: Imported bank entries do not show up in manual reconciliation
- Sales of goods of amount Rs97 lakhs to a party
- Confused About My Career After 12th — Cyber Security, AI or Finance? Need Guidance
- FAST-DS 2026 Under Tax Law - No recourse or support for person declaring via this scheme?
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
