Question

Assertion: (A) Received amount of securities premium will not debited to securities premium reserve account, on forfeiture of shares.
Reason: (R) Received amount of securities premium will be debited while writing off of certain type of capital loss or expenditure.​

Answer 1

When the company allots shares for the first time these shares can be issued at their nominal price or above or below such a nominal price. The accounting for shares issued at premium and shares issued at discount varies a little. So let us see these accounting treatments and also look at the securities premium account in some detail.

Answer 2

Answer:

Both Assertion and reasoning are correct.

Explanation:

• When a company decides to issue shares at par or above par, we call it premium issue shares. This is a fairly common practice, especially when the company has a good track record and strong financial performance and market position.
• This bonus amount can now be called up at any time by the company. Premiums are usually collected in installments or application fees, but rarely in daily payments. The disputed premium amount will be credited to the Securities Premium Account. This account is generally located on the liability side of the balance sheet under the heading "Reserves and Surplus".
• Currently, under the Companies Act 2013, there are several laws regarding the use of securities premium accounts. It states the specific purpose for which this credit can be used. Therefore, your account may only be used for these specific purposes and not for any other purpose.
• A securities premium account can be used to amortize the company's initial costs. Amortization of issuance costs of shares, debentures, etc.  

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