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In internal reconstruction, when equity is reduced by writing down face value from ₹100 to ₹50, the journal entry credits:
AP&L A/c
BSecurities Premium
CGeneral Reserve
DCapital Reduction A/c
Answer & Solution
Correct answer: D. Capital Reduction A/c
1. Step 1: The shareholder sacrifice (₹50 per share) is credited to Capital Reduction A/c.
2. Step 2: This account is then used to absorb losses.
3. Step 3: Hence (B).
_Source: ICAI BoS CA Inter Paper 1, Ch 14 "Internal Reconstruction"_