Following information are available in respect of Z Limited as on 31st March, 2024: 4,00,000 Equity share capital of 10 each 40,00,000 Capital…

CA Intermediate · Advanced Accounting · PYQS · January 2025
Following information are available in respect of Z Limited as on 31st March, 2024: 4,00,000 Equity share capital of 10 each 40,00,000 Capital Reserve 20,000 Revenue Reserve 50,00,000 Securities Premium 6,00,000 Profit and Loss Account 19,00,000 Investments 40,00,000 The company decides to buy back 20% of its Equity capital @15 per share on 1st April, 2024. Buy back is as per provisions of the Companies Act and company passed the necessary resolutions for it. For this purpose, it sold its investments of 40 lakhs for 32 lakhs. You are required to pass the necessary journal entries.

Suggested Answer and Working Notes:

In the books of Z Limited Journal Entries Particulars (₹) (₹) 1) Bank A/c Dr. 32,00,000 Profit & Loss A/c Dr. 8,00,000 To Investments (Being investment sold for the purpose of buy-back of Equity Shares) 40,00,000 2) Equity share capital A/c Dr. 8,00,000 Premium payable on buy-back A/c Dr. 4,00,000 To Equity shares buy-back A/c (Being the amount due on buy-back of equity shares) 12,00,000 3) Equity shares buy-back A/c Dr. 12,00,000 To Bank A/c (Being payment made for buy-back of equity shares) 12,00,000 4) Securities Premium A/c Dr. 4,00,000 To Premium payable on buy-back (Being premium payable on buy-back charged from Securities premium) 4,00,000 5) Profit & Loss A/c Dr. 8,00,000 To Capital Redemption Reserve A/c (Being creation of capital redemption reserve to the extent of the equity shares bought back) 8,00,000

Topics: Buyback of Securities

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic