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CMA Final · Corporate Financial Reporting · Internal Reconstruction (Capital Reduction)

Meera Textiles Ltd has 50,000 equity shares of Rs 10 each fully paid. Under a scheme of internal reconstruction approved by the Tribunal, the shares are reduced to Rs 4 each fully paid. What is the amount credited to Capital Reduction Account?

Capital Reduction Account is credited with Rs 3,00,000. Each share is reduced by Rs 6 (Rs 10 to Rs 4), and 50,000 shares multiplied by Rs 6 gives the total reduction, which is then applied to absorb accumulated losses and unrepresented assets.

  1. ARs 2,00,000
  2. BRs 3,00,000Correct
  3. CRs 5,00,000
  4. DRs 7,00,000

Explanation

Reduction per share = Rs 10 - Rs 4 = Rs 6. Total = 50,000 x 6 = Rs 3,00,000, which is credited to Capital Reduction Account and used to write off losses and fictitious assets. Rs 2,00,000 is the remaining capital of 50,000 x 4, not the reduction amount.

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