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CS Executive · Corporate Accounting and Financial Management · Accounting for Debentures

Under Section 52 of the Companies Act, 2013, which of the following is a permitted application of the securities premium account?

The securities premium account may be used to write off the discount allowed on an issue of debentures. Section 52(2)(c) expressly lists expenses, commission and discount on issue of shares or debentures as permitted applications, while dividends or trading losses are not.

  1. AWriting off the discount allowed on an issue of debentures of the companyCorrect
  2. BPaying dividend to equity shareholders
  3. CWriting off accumulated trading losses of the year
  4. DCreating the debenture redemption reserve

Explanation

Section 52(2)(c) permits applying the securities premium account in writing off expenses of, commission paid or discount allowed on any issue of shares or debentures. Dividend payment, trading losses and creating the DRR are not listed applications.

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