1.

From 2019 QP , Q No is 16 from section B, Appeared for 5 Marks

Solution:- Calculation of capital reduction

100000 equity shares of Rs 10 each fully paid reduced by Rs 7 Per share (7 *100000) = 700000

20000 share of Rs 100 each fully paid be reduced by Rs 20 per share (20*20000) = 400000

Total Amount available = 1100000

Journal Entries

Date Particulars LF Debit (Rs) Credit(Rs)

01 Equity Share capital A/c….. Dr (7 *100000) 700000
To Capital Reduction A/c ------ 700000
(Being Equity shares of Rs 10 each are reduced by
Rs 7 Per share)
02 Equity Share capital A/c…. Dr (20*20000) 400000
To Capital Reduction A/c 400000
(Being Equity shares of Rs 100 each are reduced
by Rs 20 Per share)
03 Capital Reduction A/c….. Dr 1100000
To Accumulated Loss A/c 460000
To Patents 640000
(Being amount of capital reduction is used to
write off accumulated loss and patents)

2. From 2018 QP, Q No is 14, from section B, for 5 Marks

Solution :- Calculation of capital reduction

10000 equity shares of Rs 10 each fully paid be reduced by Rs 7 per share(7*10000) =70000

2000 Preference shares of Rs 100 each fully paid be reduced by Rs 20 per share(20*2000)=40000

Total amount available =110000

Journal Entries

Date Particulars LF Debit (Rs) Credit(Rs)

01 Equity share capital A/c ….. Dr (7*10000) 70000
To Capital Reduction A/c 70000
(Being equity shares of Rs 10 each reduced by Rs
7 per share)
02 Preference share capital A/c…. Dr(20*2000) 40000
To Capital Reduction A/c 40000
(Being Preference shares of Rs 100 each reduced
by Rs 20 per share)
03 Capital Reduction A/c….. Dr 110000
To P&L A/c 45000
To Patents 65000
(Being amount of capital reduction is used to
write off P&L A/c(Loss) & Patents)

3. From 2017 Question Paper, Section B, Question No is 17 for 5 marks

Solution:- Calculation of capital reduction
40000 equity shares of Rs 10 each are reduced to Rs 5 each (5*40000) = 200000
20000 preference shares of Rs 10 each are reduced to Rs 4 each(6*20000) = 120000
Total Amount available = 320000

Journal entries in the books of swati Ltd

Date Particulars LF Debit (Rs) Credit(Rs)

01 Equity share capital A/c …. Dr(5*40000) 200000
To Capital reduction A/c 200000
(Being equity shares of Rs each are reduced to Rs 5
per share)
02 Preference share capital A/c…Dr (6*20000) 120000
To capital Reduction A/c 120000
(Being preference shares of Rs 10 each are reduced
to Rs 4 each)
03 Capital reduction A/c…. Dr 320000
To Losses A/c 130000
To Goodwill A/c 60000
To Patents A/c 80000
To Preliminary Expenses A/c 50000
(Being Amount of capital reduction is used to write
off the above fictitious assets)

Total 640000 640000

4. From 2016 Question Paper, Question No is 16, from section B, for 5 marks
Solution:- Calculation of capital reduction
20000 equity shares of Rs 10 each are reduced to Rs 5 per share(5*20000) = 100000
10000 Preference shares of Rs 10 each are reduced to Rs 6 per share(4*10000) = 40000
Total amount available for capital reduction 140000

Journal Entries

Date Particulars LF Debit(Rs) Credit(Rs)

01 Equity share capital A/c….. Dr (5*20000) 100000
To capital Reduction A/c 100000
(Being equity shares of Rs 10 each are reduced
to Rs 5 per share)
02 Preference share capital A/c …. Dr(4*10000) 40000
To Capital reduction A/c 40000
(Being Preference shares of Rs 10 Each are
reduced to Rs 6 per share)
03 Capital Reduction A/c ….. Dr 140000
To Accumulated Loss A/c 80000
To Goodwill A/c 30000
To Patents A/c 25000
To Preliminary Expenses A/c 5000
(Being Amount of capital reduction is used to
write off Above fictitious assets)
Total 280000 280000

5. From 2015 Question Paper, Q No is 17, from Section B, for 5 marks

Solution:- Calculation of capital reduction

100000 Equity shares of Rs 10 each are reduced by Rs 7 per share(7*100000) = 700000
20000 prefrence shares of Rs 100 each are reduced By Rs 20 per share(20*20000)= 400000
Total Amount Available =1100000

Journal Entries in the books of Bad Luck Co Ltd

Date Particulars LF Debit(Rs) Credit(Rs)

01 Equity Share capital A/c…. Dr(7*100000) 700000
Preference share Capital A/c Dr (20*20000) 400000
To capital reduction A/c 1100000
(Being equity shares of Rs 10 each are reduced
by Rs 7 per share and Preference shares of Rs
100 are reduced by Rs 20 per share)
02 Capital Reduction A/c…. Dr 1100000
 To Accumulated loss A/c 360000
To Preliminary Expenses A/c 100000
To Patents A/c 640000
(Being Amount of capital reduction is used to
write off above fictitious assets)