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Debenture Redemption Investment

Which of the ...

Question

Which of the following accounts can not be transferred to capital redemption reserve account?

A

Dividend equalisation account

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B

General reserves

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C

Profit and loss appropriation account

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D

Securities premium reserves

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Solution

The correct option is A Dividend equalisation account
Where any shares are redeemed otherwise than out of the proceeds of a fresh issue, there shall out of profits which would otherwise have been available for dividend be transferred to a reserve fund to be called "the capital redemption reserve fund".
Following accounts are transferred to CRR
(i) General Reserves
(ii) Profit & Loss Appropriation A/c
(iii) Securities Premium Reserves
(iv) Other free Reserves

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Q. A company wishes to redeem its preference shares amounting to Rs. 1,00,000 at a premium of 5% and for this purpose issues 5,000 equity shares of Rs. 10 each at a premium of 5%. The company also has a balance of Rs. 1,00,000 as General Reserves and Rs. 50,000 in profit and loss account. The amount to be transferred to Capital Redemption Reserve account for the purpose of redemption is ____________.

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