Share buyback "out of cash"

Accounting for the cash purchase of shares (SI 2013/999)

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I found this a useful article: https://www.accountingweb.co.uk/community/industry-insights/purchase-of-... It says a company can purchase its own shares in the following ways: 1) Out of Distributable Reserves: the most common method. 2) "Out of Cash": It allows for private companies to purchase shares using a minimum of £15,000 or 5% of its share capital in a financial year. In order to be able to do this, the company must be specifically authorised to do so in its Articles of Association. 3) Out of Capital: very complex and time consuming – requires a Statement of Solvency and possible advertising costs. 

However, I am a bit confused/being thick: What does (2) "out of cash" mean and what is the debit entry? Surely in all 3 cases the credit entry is to reduce CASH as payment to the outgoing shareholder, so all of them are ultimately "out of cash" surely? I have seen lots of articles referring to method (2) as for cash/out of cash etc and I am finding it very confusing.

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Scalloway Castle
By scalloway
10th Jul 2020 15:19

This article gives the bookkeeping entries for buying shares from distributable reserves.

https://www.icaew.com/-/media/corporate/files/members/advisory-helplines...

As I understand it using cash to buy back shares means the company buys back its shares that are being traded on the open market, ie the Stock Exchange.

Your link is broken.

https://www.accountingweb.co.uk/community/industry-insights/purchase-of-...

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