Premium on issue of shares can be used for ________________.

Issue of bonus shares

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Payment of dividends

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Payment of operating expenses

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Redemption of debentures

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Solution

The correct option is A Issue of bonus shares
To issue fully paid-up bonus shares to its existing shareholders. However, you cannot exceed the limit of the unissued share capital of the company.
Securities premium Account can be used for writing off any preliminary expenses of the company.
To write off expenses of issue of shares and debentures, such as commission paid or discount given on the issue of shares.

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Similar questions

Q. Bonus shares can be issued by a company _________________.

Q. When debentures are issued at a discount & redeemed at a premium, we route discount on issue of debentures a/c through on issue of debentures a/c.

Q. is a specific reserve that is credited when shares or debentures are issued on a premium.

Assuming that Proprietary Ratio is 0.6 : 1, state giving reasons, whether the ratio will increase, decrease or will not change in each one of the following cases:

(i) Issue of new equity shares for cash.

(ii) Issue of equity shares against purchase of machinery.

(iii) Issue of debentures against purchase of machiney.

(iv) Redemption of debentures for cash.

(v) Conversion of debentures into preference shares.

(vi) Buy-back of its own shares by a company.

(vii) Purchase of a fixed asset for cash.

(viii) Purchase of a fixed asset on long-term deferred payment basis.

(ix) Sale of a fixed asset costing Rs. 1,00,000 for Rs. 80,000.

(x) Sale of a fixed asset costing Rs. 2,00,000 for Rs. 2,50,000.

(xi) Issue of Bonus Shares.

Q. Pass necessary Journal entries relating to the issue of debentures for the following:
(a) Issued ₹ 28,000; 10% Debentures of ₹ 100 each at a premium of 15% redeemable at par.
(b) Issued ₹ 30,000; 10% Debentures of ₹ 100 each at a premium of 10% and redeemable at a premium of 15%.
(c) Issued ₹ 80,000; 10% Debentures of ₹ 100 each at par repayable at a premium of 10%.

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