A-Level Accounts Doubt! Need Help!

[Martynapaul]

Hey guys! I'm having a doubt trying UNDERSTAND Capital Redemption Reserve. It just won't register in my head unfortunately
I really just want to know how it works and how it changes and why! This is all I need.
Thanks Guys!

 

[Kulsum Shoaib]

Hey guys! I'm having a doubt trying UNDERSTAND Capital Redemption Reserve. It just won't register in my head unfortunately
I really just want to know how it works and how it changes and why! This is all I need.
Thanks Guys!

Well, its better if you read and understand it from the book. Not a difficult topic though..... and explaining it here wouldn't be enough.

 

[Burhan Ahmed]

Capital Redemption Reserve simple formula Fresh Cash issue minus value of shares redeemed at par.

 

[M.Hamza]

Capital redemption reserever arises when a company redeems shares through internal sources and not by issuing shares to finance redemption.For instance bank is a internal resource of business.When a business redeems share capital,it has to pay shareholders their amounts back and it pays via bank.If company issues additional share capital to finance redemption,then there is no need to create capital redemption reserve.But if does not issue additional share capital,then a capital redemption reserve has to be created and its entry is,
Retained earnings DR
CApital redemption Reserve CR.
EXAMPLE:A company redeemed 100000 preference shares having a par value of $1,originally issued at par.No additional shares were issued.The entry is follows;
Preference share capital DR $100000
Bank CR$100000
Retained earnings DR $100000
Capital redemption reserver CR $100000.
NOTE:There are other entries in this topic as well such as when redeemed shares were orginally issued at premium,company issued additional share capital which financed part of cost of redemption etc.I used a basic entry to clear ur core concept of capital redemption reserve.

 

[Harsh Poddar]

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[M.Hamza]

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[Harsh Poddar]

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