Question

Objective Type Question :
Answer in one Sentence only :

What is meant by share premium?

Answer 1

As per Section 78 of the Companies Act, 1956, when the shares are issued to the public at a price more than their par value, i.e. face value, the shares are said to be issued at a premium. The amount of premium received is credited to a separate account known as Securities Premium Account. It can be used for the following purposes:

a. For writing-off preliminary expenses of the company
b. For writing-off expenses of commission paid or discount allowed on issue of shares or debentures of the company
c. For issuing bonus shares