CAPITAL REDEMPTION RESERVE.

Capital redemption reserve is created  out of profit  for redemption of preference shares . same will  be  redemed   only after fully paid .

1. When capital reduce by a company & buy its own share then company create CRR,

as a : New ES/PS are issued to redeem the old PS the difference  between Face value of PS & new share will transfer CRR

2. CRR transfer in undistributed profit,( General Reserve,Profit and loss)

3. CRR fund utilized only for issuing Bonus Share.(no dividend can be distributed out of this fund.

4. Importance of CRR

   :- Maintain Working capital

   :- To protect the interest of creditors