SEMESTER V MAHARSHI DAYANAND COLLEGE PAREL MUMBAI 400012 1 Class TYBCom Subject Financial Accounting Sem V Preparation of Final Accounts of Companies Internal Reconstruction ID: 1028815
Download Presentation The PPT/PDF document "T.Y.B.COM. FINANCIAL ACCOUNTING" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
1. T.Y.B.COM. FINANCIAL ACCOUNTINGSEMESTER – VMAHARSHI DAYANAND COLLEGE PAREL MUMBAI - 4000121
2. Class : T.Y.B.ComSubject : Financial AccountingSem: VPreparation of Final Accounts of CompaniesInternal ReconstructionBuy Back of SharesInvestment AccountingEthical Behaviour and Implications for Accountants
3. TOPICBuy Back of Equity Shares S.68 of Companies Act deals with Buyback of Shares by company. This section corresponds to section 77A (Power of company to purchase its own securities) of the 1956 Act. The company whether it is public or private, to purchase its own shares or other specified securities out of following sources according to section 68(1) of the Companies Act, 2013:- a) Its free reserves; or b) The securities premium account; or c) The issue of any shares or other specified securities.
4. Conditions of buy backa) Company’s article should permit the buy-back ; b) A special resolution or board resolution has been passed at a general meeting of the company authorizing the buy-back. c) The buyback is 25% or less of the aggregate of paid-up capital and free reserves of the company.d) Debt Equity Ratio should not exceed 2:1 after buy-back.e) Only fully paid shares are bought back.f) Every buy-back should be completed within 1 year from the date of passing of the special resolution or the board resolution.
5. Free ReservesNon Free ReservesMeaningFree reserves are those reserve which can be utilised for any purpose. It is also called as divisible profit.Non free reserves are created for specific purpose. It is also called as non-divisible profit.PurposeTo declare dividend, bonus, remove losses.To write off specific lossesExamplesP&L, General Reserve, Revenue Reserve, Reserve Fund, Dividend Equalisation Reserve, **Investment Allowance Reserve (Unutilised)Capital Reserve, CRR, Security Premium, DRR, Statutory Reserve, Forfeited Shares A/c.
6.
7. How to calculate offer price & no.of shares?Steps:Sources of buy back = Free reserves + Security premium25% of owned fund = (Share capital + Free reserves + Security premium) X 25%Owned fund after buy back = Owned fund – ½ Borrowed fundMax. no.of equity shares = Equity share capital X 25% Face value
8. 1- If offer price is not given:Sources of buy back = Free reserves + Security premium25% of owned fund = (Share capital + Free reserves + Security premium) X25%Owned fund after buy back = Owned fund – ½ Borrowed fundMax. no.of equity shares = Equity share capital X 25% Face valueOffer Price = Least of 1/2/3 Max.shares
9. 2- If offer price is given:Sources of buy back = Free reserves + Security premium25% of owned fund = (Share capital + Free reserves + Security premium) X25%Owned fund after buy back = Owned fund – ½ Borrowed fundMax. no.of equity shares = Equity share capital X 25% Face value = Max shares X Offer priceMaximum Shares = Least of 1/2/3/4 Offer Price
10.