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Standard XII
Accountancy
Advantages of Shares
When a compan...
Question

When a company issues its shares of the face value Rs. 100 for Rs. 105 each, it is said that shares have been issued at a premium, which is _________________.

A
Capital profit
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B
Revenue profits
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C
Capital loss
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D
Revenue loss
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Solution

The correct option is A Capital profit
Revenue profits are what your company makes by going about its business. It doesn't matter whether the business is selling diapers, mowing lawns, selling diesel fuel or running a nursing home. The profits you earn from your operations are revenue profits
A capital gain refers to profit that results from a sale of a capital asset, such as stock, bond or real estate, where the sale price exceeds the purchase price. The gain is the difference between a higher selling price and a lower purchase price.
Therefore, a company issues its shares of the face value Rs. 100 for Rs. 105 each, it is said that shares have been issued at a premium, it is a capital profit.

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