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Capital reduction accounting

capital reduction accounting

Overdue interest and debt, distressed companies are cash strapped.
In order to write off these fictitious assets, a promo super u franqueville st pierre portion of Capital is reduced.
One of our editors will review your suggestion and make changes if warranted.Liquidation via a New Company, this involves: Selling assets to another company, using the rabies clinic proceeds to pay down remaining debts, and liquidating the business.Then Capital equal to total of these is regarded as lost Capital.The reason is that it is actually a P2 topic.Essentially debt holders convert to being equity holders, possibly retaining a lower debt amount.The company will find it difficult to obtain debt financing as well.Resets any negative retained earnings account by offsetting it with equity reserve accounts (e.g.The debt and interest also results in high gearing and low interest coverage ratios, which again prevents the company from obtaining additional debt financing.

The question will tell you what to do with any balance left on this account.
This discourages potential investors from investing in the company.
This involves the company.However, again, it is unlikely that you will be asked any calculations.The question will tell you specifically what balances to be changed (e.g.March 25, 2015 at 11:56 am 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 cant understand the logic behind the theory what are.Give the appropriate journal entries.The Profit and Loss account shows a credit balance of Rs 2, 80,000.

Since this would allow equity holders to pay themselves dividends again, court approval is typically required so as to take into account the interests of other stakeholders (e.g.