Compromise/ Arrangements :

A scheme of compromise and arrangements involve sacrifices by the shareholders, debenture holders, creditors etc. when the company faces financial problems.

Accounting Entries

1	When shareholders give up their claim to reserves and accumulated profits
	Reserves A/c                                                                                                        Dr.
	To Reconstruction A/c
2	When outside liabilities is settled at lesser amount
	Outside liabilities A/c                                                                                      Dr.
	To Reconstruction A/c