Redemption of Preference Shares

Preference shares can be redeemed if they are:

• Irredeemable

• Issued at a discount

• Fully paid-up

• Partly paid-up

As per the Companies Act, redemption of preference shares can be made:

• Only from the profits of the company

• Only by issuing new equity shares

• Either from profits or proceeds of a fresh issue of shares

• Only from the share premium account

The amount transferred to Capital Redemption Reserve (CRR) should be equal to:

• Amount of profit earned in the year

• Nominal value of shares redeemed out of profits

• Premium payable on redemption

• Market value of redeemed shares

Premium payable on redemption of preference shares is adjusted against:

• Securities Premium Account

• Profit and Loss Account

• Capital Redemption Reserve

• Both A and B

When preference shares are redeemed at a premium, the journal entry includes:

• Debit to Share Capital only

• Debit to Premium on Redemption only

• Debit to Share Capital and Premium on Redemption

• Credit to Share Capital

Capital Redemption Reserve (CRR) can be used for:

• Declaring dividends

• Issuing fully paid bonus shares

• Writing off losses

• Redeeming debentures

Which of the following statements is false about redemption of preference shares?

• Redemption can be done only if shares are fully paid-up

• CRR is created when shares are redeemed out of fresh issue

• Premium on redemption can be adjusted from securities premium

• CRR is a part of share capital

If a company redeems preference shares worth Rs.5,00,000 out of profits, what amount should be transferred to CRR?

• Rs.0

• Rs.5,00,000

• Rs.2,50,000

• Rs.1,00,000

Which section of the Companies Act, 2013, deals with redemption of preference shares?

• Section 52

• Section 55

• Section 42

• Section 62

The maximum period for redemption of preference shares is:

• 5 years

• 10 years

• 20 years

• 30 years