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Reserves and Surplus

In case of re...

Question

In case of redemption option of preference shares is out of the fresh issue of equity shares, which of the following account will be credited?

A

Capital reserve account

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B

Equity share capital account

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C

Current liabilities and provision account

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D

Capital redemption reserve account

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Solution

The correct option is B Equity share capital account
The redemption of preference shares can be done by issuing new equity shares.
When shares are issued the Equity share capital account is credited to record the issue of shares. This is done because a credit of the amount indicates an increase in the equity share.

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