CS Executive · Corporate Accounting and Financial Management · Related Aspects of Company Accounts
Arjun Ltd makes a rights issue of 50,000 equity shares of Rs 10 each at Rs 14 per share, the full amount being received in cash from existing members. What is the credit to securities premium account?
The securities premium credit is Rs 2,00,000. Each share is issued at Rs 14 against a face value of Rs 10, giving Rs 4 premium, and 50,000 shares yield Rs 2,00,000, which section 52 requires to be transferred to securities premium account.
- ARs 5,00,000
- BRs 7,00,000
- CRs 2,00,000Correct
- DRs 2,80,000
Explanation
Premium per share = 14 - 10 = Rs 4. Total = 50,000 x 4 = Rs 2,00,000, credited to securities premium under section 52. Rs 5,00,000 is share capital, and Rs 7,00,000 is total cash received.
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