Question

securities premium reserve cannot be used by the company for

a)Discount Allowed on issue of shares and debentures

(b) Preliminary Expenses

(c) Discount

d) EXPENSES ON ISSUE OF SHARE AND DEBENTURES ​

Answer 1

Answer:

Explanation:

Writing off losses of the company

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)