According to Section 78 of the companies Act, the amount in the Securities Premium A/c cannot be used for the purpose of __________.
According to Section 78 of the companies Act, the amount in the Securities Premium A/c cannot be used for the purpose of __________.
The correct option is B 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).
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).
