Internal Company Reconstruction-Capital Reduction By Refunding Surplus Capital To Shareholders (Part B)

Internal Company Reconstruction-Capital Reduction
As described, basically there are three situations
  1. refunds any surplus capital
  1. cancel paid up capital not represented by assets
  1. reduces/write off uncalled capital on any of the shares

Accounting For Company Reconstruction- REFUND OF SURPLUS CAPITAL

In this case, it is merely a cash outflow where money are return to the shareholders.

Company A has 100,000 shares at $1 per share . It has successfully applied to relevant authorities and being given the sanction to reduce its $1 share to 50 cent per share so that one half can be refunded to the shareholders.

Accounting entries:-

$ $
Share Capital 50,000



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