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CA Intermediate · Advanced Accounting · Internal Reconstruction

Ishaan Pharma Ltd has 10,000 equity shares of ₹100 each, ₹75 per share paid-up. Under a reconstruction scheme, these are exchanged for equity shares of ₹25 each fully paid-up, on a one-for-one basis. What amount is credited to the Capital Reduction Account for the equity share capital?

₹5,00,000 is credited to the Capital Reduction Account. The old paid-up capital is 10,000 shares at ₹75, which is ₹7,50,000, and the new fully paid capital is 10,000 shares at ₹25, which is ₹2,50,000. The difference is the amount of paid-up capital sacrificed.

  1. A₹7,50,000
  2. B₹2,50,000
  3. C₹5,00,000Correct
  4. D₹1,00,000

Explanation

Paid-up capital before reconstruction = 10,000 × 75 = ₹7,50,000. Capital after = 10,000 × 25 = ₹2,50,000. The reduction credited to Capital Reduction Account = 7,50,000 − 2,50,000 = ₹5,00,000. ₹2,50,000 wrongly uses the uncalled amount or the new capital, not the paid-up reduction.

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