CA Foundation · Accounting · Company Accounts
Iyer Ltd. issued 1,000 equity shares of ₹10 each at a premium of ₹2 per share. In which account is the premium credited on allotment?
The premium is credited to the Securities Premium Account. It is a capital receipt above face value, so it is not part of share capital or profit, and it is shown under Reserves and Surplus.
- ASecurities Premium AccountCorrect
- BShare Capital Account
- CGeneral Reserve Account
- DStatement of Profit and Loss
Explanation
The premium received over face value is a capital receipt and is credited to Securities Premium, not to Share Capital. It is shown under Reserves and Surplus and is usable only for purposes permitted by the Act.
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