Question

Securities Premium Account is shown in the balance sheet under _______.

• A. Reserves & Surplus
• B. Miscellaneous Expenditure
• C. Current Liabilities
• D. None of the above

Answer 1

Answer: (A)

Reserves & Surplus

Security Premium Reserve is the additional amount charged on the face value of any share when the shares are issued, redeemed, and forfeited

The Companies Act 2013 states that when security premium has to be recorded in the balance sheet, it done in the Reserve & Surplus mentioned under the Equity & Liabilities of a company’s balance sheet. It is added only because the premium received by the company is an income for them. Moreover, reserve & surplus head records all those items only which are related to any kind of reserve created by the company for a specific purpose.

Thus, this item is added under theReserve & Surplus