Question

According to Companies Amendment Act 1999, the Premium on issue of Debenture should be credited to ¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬__________ *

Answer 1

Answer:

securities premium account

Answer 2

Answer:

The Securities Premium A/c

Explanation:

The issue of shares at par implies that the shares have been issued for an amount exactly equal to their face or nominal value. In case shares are issued at a premium, i.e. at an amount more than the nominal or par value of shares, the amount of premium is credited to a separate account called ‘Securities Premium Reserve Account’ under the head Reserves and surplus in the balance sheet.

It can be used only for the following five purposes:

(a) To issue fully paid bonus shares to the extent not exceeding unissued share capital of the company;

(b) To write-off preliminary expenses of the company;

(c) To write-off the expenses of, or commission paid, or discount allowed on any securities of the company; and

(d) To pay premium on the redemption of preference shares or debentures of the company.

(e) Purchase of its own shares (i.e., buy back of shares).

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