Internal reconstruction

bal in deb a/c is                1400000

accroud interest is                70000

.'.total claim                       1470000

claim reduce to                   230000      (deb holder a/c)

reduce by                          1240000        (goto capital reduction a/c)

JOURNAL ENTRY

1)  debenture a/c                       dr         1400000

      intrest on debenture a/c       dr             70000

              To capital reduction a/c                                   1240000

              To debenture holder a/c                                     230000

2) debenture holder a/c             dr           230000

                    To 10%pref share capital a/c                       230000

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effect in balance sheet:

1.debenture a/c will not appiare in bal sheet

2. intrest on debenture a/c is also not appiare in bal sheet

3.10%pref share will we shown with amounting rs 230000 as fully paid up

4.At the end bal of capital reduction transfer to capital reserve a/c

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