Page 58 - Ebook Financial Accounting 3

3.4 Redemption methods of Redeemable Preference Shares and Debenture

3.4.1 Section 72 of the Companies Act 2016, rules regarding the redemption of preference

shares:

a. Redemption is not considered as reducing the amount of share capital of the company.

b. The shares can be redeemed only if they are fully paid.
c. Redemption shall be out of one of the following :

i. A fresh issue of share
ii. Profit; or

iii. Capital of the company

Journal entries related to the redemption of redeemable preference shares.

Debit Credit
RM RM

Redeemable preference shares capital xx

Preference share redemption account xx
(Redeemable preference shares are being redeemed)

Preference share redemption account xx
Bank xx

(Payment made to the preference shareholders)

Bank xx

Share capital xx

(Issue of new shares for the redemption of shares)
OR

Retained profit xx
Share capital xx

(Transfer of profits to contributed capital)

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