Doubt in internal reconstruction

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Querist : Anonymous

Querist : Anonymous (Querist)

09 May 2013 i am very much confused in passing capital reduction entry i am not getting when to reduce the face value and when to reduce the paid up value i.e when to pass reduction entry and when to pass replacement entry please help urgently solution required.

Regards.

CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)

10 May 2013 Reduction -

When paid up value is reduced. For e.g Equity shares of Rs.100 each have been reduced to equity shares of 10 each. The number of shares would be same. So if there were 1000 shares of Rs.100, they would be reduced to 1000 shares of Rs.10. Capital reduction to be credited by 90,000/-

Replacement -
This happens when shares are split. For e.g, in the above case if each share of Rs.100 is converted to 10 shares of Rs.10, then there is no reduction.

Original Value = 1000 X 100 = 100,000
Replaced value = 1000 X 10 X 10 = 100,000
{For one share of 100, 10 share of 10 is issued}

Hope it is clear. If you any specific doubt, you can post the question here. We can help you out.

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Querist : Anonymous

Querist : Anonymous (Querist)

10 May 2013 thanks sir due to your reply my concept is very much clear but sir i want to know how to judge it whether we have to pass replacement entry or reduction entry after reading adjustment because i am not able to identify whether they are asking replacement or reduction.

Regards

CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)

10 May 2013 Read the illustration above.

Practice a couple of question for reduction and replacement. Try to analyse them. You will be able to solve them.

In case of further query, post the question here.

Querist : Anonymous

Querist : Anonymous (Querist)

10 May 2013 thanks sir i ll do practice of same thanks a lot.

Regards.

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