Question

The Securities Premium amount may be utilized by a company for ___________.

• A. Writing off any loss on sale of fixed asset
• B. Writing off any loss of revenue nature
• C. Payment of dividends
• D. Writing off the expenses/discount on the issue of debentures

Answer 1

Answer: (D)

Writing off the expenses/discount on the issue of debentures

Security Premium Reserve is the reserve created to transfer the premium charged on the issue of shares.

This security premium is used to write off all the preliminary expenses incurred on issue of shares or debentures.

Section $78$ under companies act $2013$ states that $SPR$ can be used to write off the expenses like a discount on issue of shares/debentures.