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Redemption of preference share
The document discusses various types of preference shares such as cumulative, non-cumulative, redeemable, non-redeemable, convertible, and participating shares. It also covers the accounting treatment for redeeming preference shares, including transferring profits to a capital redemption reserve equal to the nominal value of shares redeemed. The capital redemption reserve can be used to issue bonus shares. Securities premium may be used to write off any premium paid to redeem preference shares.
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Introduction to preference shares and their characteristics such as preferential rights and fixed dividends.
Overview of different types of preference shares, including cumulative, non-cumulative, redeemable, non-redeemable, convertible, non-convertible, participating, and non-participating shares.
Explanation of redemption process, including conditions for redeeming preference shares and the role of the Capital Redemption Reserve Account.
Different methods for redeeming preference shares: out of profits, proceeds from fresh issue, or a combination of both.
Journal entries illustrating the redemption of redeemable preference shares with related profit transfers.
Another practical example for redeeming preference shares with equity issuance.
Potential uses of the Securities Premium Account in company accounting.
Details on creating a Capital Redemption Reserve Account and providing for premium on redemption.
Important notes to remember regarding the redemption of preference shares, including capital trends and conditions.