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CA Foundation · Accounting · Company Accounts

Under Schedule III (Division I) of the Companies Act, 2013, where should 'Securities Premium' appear in the Balance Sheet of a company?

Securities Premium is shown under Equity and Liabilities, within Shareholders' Funds, in the sub-heading Reserves and Surplus. It is an amount received above face value and belongs to owners, so it is neither a liability nor part of Share Capital.

  1. AUnder Equity and Liabilities, within Shareholders' Funds, as part of Reserves and SurplusCorrect
  2. BUnder Non-Current Liabilities, as Long-term Provisions
  3. CUnder Current Liabilities, as Other Current Liabilities
  4. DUnder Shareholders' Funds, as part of Share Capital

Explanation

Securities premium is a capital reserve-type item and Schedule III lists it under Reserves and Surplus, which is part of Shareholders' Funds. It is not a liability to outsiders, so the liability headings are wrong. It is also not share capital, because it is the amount received above the face value.

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