Question

Securities Premium Account is shown on the liabilities side of the company's balance sheet under the heading ________.

• A. Share Capital
• B. Current Liabilities and Provisions
• C. Unsecured Loans
• D. Reserves and Surpluses

Answer 1

The correct option is D Reserves and Surpluses

It is quite common for the shares of financially strong and well-managed companies to be issued at premium, i.e. at an amount more than the nominal or par value of shares.

Thus, when a share of the nominal value of Rs. 100 is issued at Rs. 105, it is said to have been issued at a premium of 5 percent.

When the issue of shares is at premium, the amount of premium may technically be called at any stage of the issue of shares.

However, premium is generally called with the amount due on allotment, sometimes with the application money and rarely with the call money. The premium amount is credited to a separate account called 'Securities Premium Account' and Is shown on the liabilities side of the company's balance sheet under the heading 'Reserve and Surplus'.