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Capital Reduction / Reconstruction a/c (Dr) To Equity Share Capital A/c (Being issue of ________ Nos of Equity shares of Rs.____/- for arrears of preference dividend) Like the same, Unrecorded liability is also not reflected in the balance sheet, so settlement of unrecorded liabilities by issuing the equity shares of the company with the same journal entry.

It is like settling the arrears of preference dividend to the preference share holders. The arrears of preference dividend is not reflected in the balance sheet. at the time of Internal reconstruction, the arrears in preference dividend to be converted into equity shares by passing the below entry. Capital Reduction / Reconstruction a/c (Dr) To Equity Share Capital A/c (Being issue of ________ Nos of Equity shares of Rs.____/- for arrears of preference dividend) Like the same, Unrecorded liability is also not reflected in the balance sheet, so settlement of unrecorded liabilities by issuing the equity shares of the company with the same journal entry. Capital Reduction / Reconstruction a/c (Dr) To Equity Share Capital A/c (Being issue of ________ Nos of Equity shares of Rs.____/- for unrecorded liabilities)