SDA Ltd. invited application for 4,000 equity shares of 10 each at a premium of * 2 payable with application. The entire amount is payable along with application. The issue was oversubscribed by 1,000 shares. What will be the amount credited to equity share capital and securities premium reserve account respectively?
Answers
Explanation:
1.Terms of Issue of Shares
(i) Issue of shares at par When shares are issued at their face value, the shares are said to have been issued at par. i.e. issue price and face value are same.
(ii) Issue of shares at premium When shares are issued at a value that is higher than the face value of the shares, the shares are said to have been issued at premium, i.e. issue price is more than face value.
2.Utilisation of Securities Premium Reserve Section 52 (2) of the Companies Act, 2013 restrict the use of the amount received as premium on securities for the following purposes
(i) In purchasing its own shares (buy back) (Section 77A).
(ii)Issuing fully paid bonus shares to the members (Section 78).
(iii)Writing-off preliminary expenses of the company (Section 78).
(iv)Writing-off the expenses of, or the commission paid or discount allowed on any issue of securities or debentures of the company (Section 78).
(v)Providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company (Section 78).