Question

securities premium received on issue of shares cannot be used for the purpose of buy back of shares​

Answer 1

Answer:

Your answer is wrong

Explanation:

Securities premium are used for the purpose of buy back of shares.

Another uses of securities premium are as follows:

1. Towards issue of un-issued shares of the company to be issued to members of the company as fully paid bonus securities.
2. To write off preliminary expenses of the company.
3. To write off the expenses of, or commission paid, or discount allowed on any of the securities or debenture of the company.
4. To provide for premium on the redemption of redeemable preference shares or debenture of the company.

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Answer 2

Answer:

The required given statement is wrong.

Explanation:

Securities premiums are used for the purpose of buying back shares.

• When the corporation first distributes shares, these shares may be issued at their nominal price, as well as above or below that price. Shares issued at a premium are accounted for differently than shares issued at a discount. Consequently, let's examine these accounting practices as well as the securities premium account in more detail.

• We refer to shares issued at a premium as when the corporation chooses to issue shares at a price greater than the nominal value or face value. It is a fairly typical practice, particularly when the business has a solid track record, strong financial results, and a solid reputation.

• Let's say a share has a face value of Rs. 100 and is issued by the corporation at Rs. 110. It is said that the share was issued at a 10% premium. The premium will be shown in a separate account called the Securities Premium Account rather than becoming a part of the Share Capital account.

• The corporation can now call up this premium amount whenever it wants, i.e. with any call. The premium is often collected using allocation or application money, and rarely with call money. The Securities Premium Account has been credited with the premium sum that we previously specified. On the liabilities side of the balance sheet, under the heading Reserves and Surplus, is where you'll find this account.

Therefore, the given statement the securities premium received on the issue of shares cannot be used for the purpose of buying back shares is ​wrong.

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