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Question
When redeemable preference shares are redeemed out of divisible profits, an amount equivalent to the nominal value of the shares redeemed must be transferred out of divisible profits to _________.
When redeemable preference shares are redeemed out of divisible profits, an amount equivalent to the nominal value of the shares redeemed must be transferred out of divisible profits to _________.
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Solution
The correct option is D capital redemption reserve account
To the extent that the preference shares are redeemed out of profits, Capital Redemption Reserve Account must be credited, debiting the profit and loss Account, general reserve or other accounts showing profits otherwise available for distribution of dividends. Capital Redemption reserve account can be utilised for the issue of fully paid bonus shares to the members of the company.
To the extent that the preference shares are redeemed out of profits, Capital Redemption Reserve Account must be credited, debiting the profit and loss Account, general reserve or other accounts showing profits otherwise available for distribution of dividends. Capital Redemption reserve account can be utilised for the issue of fully paid bonus shares to the members of the company.
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