CA Intermediate · Advanced Accounting · Internal Reconstruction
Vihaan Textiles Ltd. has 50,000 equity shares of ₹10 each, fully paid up. Under a scheme of internal reconstruction duly approved by the Tribunal, each share is reduced to ₹4 fully paid up. What amount will be credited to Capital Reduction Account on this reduction?
₹3,00,000 is credited to Capital Reduction Account. Each share is reduced by ₹6 (₹10 to ₹4), and 50,000 shares give up ₹6 each. The figure of ₹2,00,000 is the capital remaining after reduction, not the sacrifice made by shareholders.
- A₹3,00,000Correct
- B₹2,00,000
- C₹5,00,000
- D₹4,00,000
Explanation
Reduction per share = ₹10 − ₹4 = ₹6. Total reduction = 50,000 × ₹6 = ₹3,00,000, which is credited to Capital Reduction Account. ₹2,00,000 is wrong because it is the new capital (50,000 × ₹4), not the amount given up.
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