Latest Comments
RevaAsces, lesbian courious teens, bryan
Amanah Raya to enter REIT market 3
opudohawb, qexmocruxlu, smoking
Rights Issue: Understanding Its Purpose, Mechanism & Difference Between Bonus Issue 6
gfhghgf, Aditya Dubey, rafi [...]
Difference Between ABC system versus Traditional based costing system 7
Narinder Singh, Malik Kashif, Ahmed [...]
Bonia Proposes Main Board Transfer, 1-for-2 bonus, Share Split 1
sickexceelM
Accounting Treatment & Work Flow on Write Off Bad Debts and Provision for Doubtful Debts 4
anita, Nandita, ezeokafor amrachi .i. [...]
Meta
Reasons For Capital Reduction And Its Accounting Treatment
Published by slang July 21st, 2006 in Co. Reconstruction, Corp. RestructuringOften, in the papers, we heard about companies undergoing capital reduction. So what really, is capital reduction?
Simply reduction of capital is the diminution in the nominal amount of the share capital or reduction in the paid up capital of a company.
In what situation may a company reduce it share capital?
The circumstances might include the following:
- Where the capital is unrepresented by assets;
- Where substantial trading losses have accumulated;
- Where there are extensive capital losses requiring revaluation of the assets;
- To return excess cash to its shareholders re: where there is no likelihood of the cash ever being required for the business
Reduction of Share Capital is a very serious matter:
As it must comply with the provisions in the Companies Act, certain legal formalities and receive the sanction from the Court.
Return to Content Page for all articles on company capital reduction/reconstruction/reorganization
If you found this post useful, keep updated with future posts by subscribing to FMAccounting (for free) through RSS or email.
Related Entries
4 Responses to “Reasons For Capital Reduction And Its Accounting Treatment”
- 1 Pingback on Jun 24th, 2008 at 9:01 pm
Leave a Reply
Navigation
One of our companies is going through capital restructuring. Its equity is as follows:
Share capital $1500k
Loss: -$400k
What are the debits and credits? Thks
sharecapital a/c Dr.
To capital reduction a/c
My company in Thailand have invested in one company based in USA for 100%. The initial investment is to be assumed at 100 shares @ 40 Baht per share on that date. Today, it do want to reduce the share to 60 shares and return the 40 shares of reduction back to Thailand. But the exchange rate is now 32. How can we book it in our accounting for investment.
Thank you and best regards,
Sakda Nummuang,