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hi sir
i am currently studying chapter corporate reconstruction and re organisation in my study text book
however i am having some difficulties in understanding the capital reduction account
i can’t understand the logic behind the theory
what are the steps i should follow when attempting these types of question
i know that there is a step whereby it says to reduce the loss incurred through the share premuim and share capital account
then there was something saying reduce the unpaid capital. i cannot seem to understand the logic behind this theory
could you kindly help me out please by explaining what are the steps i should take to draw up the capital reduction account
i cannot see anything in the video notes nor the video lectures regarding the capital reduction account
thank you
You are correct in saying that there is nothing about this in the notes. The reason is that it is actually a P2 topic.
It has rarely been asked in P4 (and is less likely these days anyway). If it is asked, then it will not be a question of needing to learn steps. The question will tell you specifically what balances to be changed (e.g. reducing share capital). The double entry for the changes goes to the reconstruction account. The question will tell you what to do with any balance left on this account.However, again, it is unlikely that you will be asked any calculations. If it is there it is more likely to be discussion. The only question there has been on it in recent years was MandM Co in June 2010, which was entirely written and was a section B question.
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