Any balance in the capital reduction account after the writing of lost capital is transferred to ________________.
Any balance in the capital reduction account after the writing of lost capital is transferred to ________________.
The correct option is A Capital reserve account
A new account, viz. Capital
Reduction Account, is to be opened for transferring the part of capital which
is lost, i.e., not represented by assets.
In other words, this account reveals
the sacrifices made by various parties, viz. equity shareholders, preference
shareholders, debenture-holders, creditors, etc.It is needless to say that this
is done by writing-off accumulated losses, intangible assets, over-valuation of
assets, etc. At the same time it must be
remembered that appreciation of the assets, if any, must be passed through this
account (i.e. Re-organisation/Reconstruction Account), that is, this account
should be credited.
The balance if any, should be transferred to Capital
Reserve Account.
The entry is as:-
Share cap.
A/c ………….Dr. xx
To cap reduction A/c………Cr. xx
A new account, viz. Capital Reduction Account, is to be opened for transferring the part of capital which is lost, i.e., not represented by assets.
In other words, this account reveals the sacrifices made by various parties, viz. equity shareholders, preference shareholders, debenture-holders, creditors, etc.It is needless to say that this is done by writing-off accumulated losses, intangible assets, over-valuation of assets, etc. At the same time it must be remembered that appreciation of the assets, if any, must be passed through this account (i.e. Re-organisation/Reconstruction Account), that is, this account should be credited.
The balance if any, should be transferred to Capital Reserve Account.
The entry is as:-
Share cap. A/c ………….Dr. xx
To cap reduction A/c………Cr. xx
