Please tell why DRR is made on 30 th April n not on 31st March?

Now we have started Publishing the Useful Comments and Discussion  as received on  WhatsApp Group for Future reference of Teachers and Students. A Query answered by Sh. ABHISHEK SINGH follow:

 Query 1
1. Please tell why DRR is made on 30 th April n not on 31st March?

Query 2
In which type of questions of own debentures we assume DRR n DRI already exist n where we are supposed to create them.

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Reply on Query 1
Dear All
DRR and DRI are two different concepts...
The objective of DRR is to block surplus for redemption perspective.....
To synchronize it, the company should create DRR @25% before the beginning of effective redemption year....
Sequence states DRR should be created first and then DRI...
While DRI is done to make the funds available for payment.
 In accordance to company act and micellaneous rules it should be created by 30th April....
Now, law is silent about the DRI whether created whole or part,  but as per Rule 18 (7)(c)(v) The percentage should not fall below 15% in the year....so to comply law teachers should see that if the redemption is in lumpsum then DRI should be done with value of debentures(ie. In a one go @15%)....but if draw of lots is there it is better to created DRI every year so that the Rule 18 (7)(c)(v) should comply....
Since miscellaneous rule states that DRI 'shall not be less than 15%'....
Nothing prescribed about the maximum amount to be invested in DRI...so the maximum can also be created but since it is new to all teachers and student and we does not assume such a detailed explanation from the students also...it is better to comply with law rather than do research on it......

Reply on Query 2
In regards to purchase of own debentures it is better to see the mark allotted to the question if it is for 3 Mark it is better to shown purchase entry and profit and transfer to profit entry along with this give a one liner note about your assumption that DRR & DRI is existing....
Regards
Abhishek

‌A query whether after amendment of Companies Act, 2013 in May 2015 a company be formed purely on the basis of debts is being asked. ‌

Now we have started Publishing the Useful Comments and Discussion  as received on  WhatsApp Group for Future reference of Teachers and Students. A Query answered by V Wason a Known writer  (Accounts of XI and XII Class).

Good Morning Friends,
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‌A query  whether after amendment of Companies Act, 2013 in May 2015 a company be formed purely on the basis of debts is being asked.

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‌Answer:
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‌The Government  through its Official Gazette dated 25 May 2015 has only omitted the chain of words

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‌'of one lakh rupees or such higher paid up share capital' from clause (68)

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‌and 'of five lakh rupees or such higher paid up capital' from (71) of section 2 of the Companies Act, 2013.

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‌After such omission the definition of Private Comany and Public Company stands as under:

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‌Section2(68): "Private Company means a company having a minimum paid up share capital as may be prescribed....."

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‌Section 2(71): "Public Company means a company which is not a private company; has a minimum paid up share capital as may be prescribed....."

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‌Just because of this  omission this does not mean that there is no requirement for share capital.

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‌Correlating this amendment with section 464 of The Companies Act 2013 wherein the limit of maximum no.of persons for forming partnership is 100 though the Central Government has prescribed the maximum no.of persons as 50.

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‌Basically,  the amendment in the Principal Act has omitted the quantification of the amount required yet it  still leaves the words 'share capital as may be prescribed' in the definitions of Private and Public Company.

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‌More importantly for formation of a company  form INC-29 is required to be filed and requires stamp duty to be paid. Presently, a software which requires these forms to be filed with Ministry of Corporate Affairs still requires a stamp duty to be paid on Rs.100000.

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‌Let us imagine a situation, though which is not practical at all,  a company is fully financed through debt.  In this case,  after paying interest to debentureholders, taxes to government the balance i.e. surplus in statement of P/l shall pertain to whom...?????

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‌Doe this imply that ratios like EPS, DPS,ROE and concepts like Trading on Equity for which every business concern is always keen to obtain benefit of lower cost over ROI will have no relevance...?????

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‌Anyways My Heariest Wishes for HAPPY DIWALI to ALL TEAM MEMBERS.

‌Regards

 by V. WASON

(A Known Writer)