Alteration_and_Reduction_of_Share_Capital_.pptx

Alteration_and_Reduction_of_Share_Capital_

1. ALTERATION AND REDUCTION OF SHARE CAPITAL

2. ALTERATION OF SHARE CAPITAL Alteration of share capital refers to any change in the company's share capital such as the issue of new shares, conversion of debentures or preference shares, or consolidation/subdivision of shares.

3. ISSUE OF NEW SHARES When a company issues new shares, the amount received is credited to Share Capital Account. Premium, if any, is credited to Securities Premium Account.

4. JOURNAL ENTRY – ISSUE OF SHARES Bank A/c ............Dr To Share Capital A/c To Securities Premium A/c (if any) (Being new shares issued at premium recorded)

5. CONVERSION OF DEBENTURES OR PREFERENCE SHARES When debentures or preference shares are converted into equity shares, the relevant account is debited and the Share Capital Account is credited based on the conversion terms.

6. JOURNAL ENTRY – CONVERSION Debentures/Preference Shares A/c ........Dr To Share Capital A/c (Being conversion of debentures/preference shares into equity shares)

7. CONSOLIDATION OR SUBDIVISION OF SHARES Consolidation reduces the number of shares and increases par value; subdivision increases the number of shares and reduces par value. Adjustments are made in Share Capital and Premium Accounts.

8. REDUCTION OF SHARE CAPITAL Reduction of share capital means decreasing the company's share capital by cancelling or extinguishing a portion of shares not required by the company.

9. STEPS IN REDUCTION OF CAPITAL • Determine amount of share capital to be cancelled. • Adjust Share Capital Account. • Transfer reduction to Capital Redemption Reserve. • Reflect any changes in Profit & Loss account.

10. JOURNAL ENTRY – REDUCTION Share Capital A/c ............Dr To Capital Redemption Reserve A/c (Being reduction of share capital transferred to reserve)

11. COMPLIANCE REQUIREMENTS Companies must comply with legal requirements, obtain shareholder and regulatory approvals. Non-compliance may result in penalties or legal action.

12. CONCLUSION Alteration and reduction of share capital are vital restructuring tools for companies. Proper accounting and compliance ensure transparency and financial stability.