Redemption of Pref Shares

Basically CRR is created at the time of redemtion of Prefrence share.

CRR must be created equal to the face value of prefrence share gone for redemtion if there are no issue of shares.

Journal Entry.

Free Reserves A/c   Dr.

        To CRR

If we have issued shares at the time of redemtion then CRR is reduced by the face value of shares issued.

Logically This is done because.

Creditor and Debenture holder has prefrencial right over the Prfrence Shareholder. On redemtion or payment to the shareholders debenture holder disagrees regarding there prefential right at the time of liquidation.

To fix this problem CRR is created.

For further clarification mail me to samrendra @ mail.com