Corporate Accounting Redemption of Preference Shares
For recording the redemption of preference shares in the books of company who issued the shares, we see whether these preference shares are fully paid or not. Only fully paid up shares can be redeemed. In redemption, we repay the amount of preference shareholders. Following are the main journal entries which are passed for redemption of preference shares. 1. When preference shares are due on the maturity date with its premium amount. At that time, we will pass following journal entry. Redeemable preference share capital account Dr. ( With face value) Premium on Redemption Account Dr. ( with the premium to be paid on redemption ) Preference Shareholders Account or Preference Share Redemption Account Credit Understanding of this Journal Entry : Main aim of debiting redeemable preference share capital account is to reduce this capital from business . When any capital is reduced from business it will be debited when any capital is increas...