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Per Sec 69(1), when a company buys back shares out of free reserves, an amount equal to the nominal value of shares bought back is transferred to:
ASecurities Premium Account
BCapital Redemption Reserve Account
CGeneral Reserve
DRevaluation Reserve
Answer & Solution
Correct answer: B. Capital Redemption Reserve Account
1. Step 1: Sec 69(1) mandates transfer of nominal value to the Capital Redemption Reserve (CRR) Account.
2. Step 2: CRR is shown separately in the balance sheet.
3. Step 3: Hence (B).
_Source: ICAI BoS CA Inter Paper 1, Ch 12 "Buy-Back of Securities"_