The following is the summarized Balance Sheet of Trinity Ltd. as at 31.3.2023: Liabilities ₹ Assets ₹ Share Capital Fixed Assets 3,00,000 Authorised…

CA Foundation · Accounting · RTP · January 2025
The following is the summarized Balance Sheet of Trinity Ltd. as at 31.3.2023: Liabilities ₹ Assets ₹ Share Capital Fixed Assets 3,00,000 Authorised Less:Dep 1,00,000 10,000 10% Redeemable Preference Shares of 10 each 1,00,000 2,00,000 90,000 Equity Shares of 10 each 9,00,000 Investments 1,00,000 10,00,000 Issued, Subscribed and Paid-up Capital Current Assets and Loans and Advances 10,000 10% Redeemable Preference Shares of 10 each 1,00,000 Inventory 45,000 10,000 Equity Shares of 10 each 1,00,000 Trade receivables 25,000 (A) 2,00,000 Cash and Bank Balances 50,000 Reserves and Surplus General Reserve 1,20,000 Securities Premium 70,000 Profit and Loss A/c 18,500 (B) 2,08,500 Current Liabilities and Provisions (C) 11,500 Total (A + B + C) 4,20,000 Total 4,20,000 For the year ended 31.3.2024, the company made a net profit of 35,000 after providing - 20,000 depreciation. The following additional information is available with regard to company’s operation : 1. The preference dividend for the year ended 31.3.2024 was paid. 2. Except cash and bank balances other current assets and current liabilities as on 31.3.2024, was the same as on 31.3.2023. 3. The company redeemed the preference shares at a premium of 10%.

Suggested Answer and Working Notes:

Journal Entries in the Books of Trinity Ltd. Particulars Dr. ₹ Cr. ₹ Dividend A/c Dr. 10,000 To Bank A/c 10,000 (Dividend on preference paid) Profit & Loss A/c Dr. 10,000 To Dividend A/c 10,000 (Dividend on preference shares written off to profit and loss account) 10% Redeemable Preference Capital Dr. 1,00,000 Premium on redemption of Preference Shares Dr. 10,000 To Preference Shareholders 1,10,000 (Amount payable to preference shareholders on redemption) Profit & Loss A/c Dr. 10,000 To Premium on Redemption of Preference shares 10,000 (Amount of premium payable on redemption of preference shares) Bank A/c Dr. 90,000 Profit and Loss A/c Dr. 10,000 To Investments A/c 1,00,000 (Amount realised on sale of Investments and loss thereon adjusted) Preference shareholders A/c Dr. 1,10,000 To Bank 1,10,000 (Payment made to preference shareholders) General Reserve A/c Dr. 1,00,000 To Capital Redemption Reserve A/c 1,00,000 (Transfer to the Capital redemption reserve account on redemption of shares) Capital Redemption Reserve A/c Dr. 1,00,000 Securities Premium A/c Dr. 70,000 General Reserve A/c Dr. 20,000 Profit & Loss A/c Dr. 10,000 To Bonus to Equity Shareholders A/c 2,00,000 (Amount adjusted by issuing bonus shares in the ratio of2:1) Bonus to Equity Shareholders A/c Dr. 2,00,000 To Equity Share Capital 2,00,000 (Balance on former account transferred to latter)

Topics: Redemption of Preference Share

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