Skip to content

CMA Intermediate · Corporate Accounting and Auditing · Issue, Forfeiture, Rights, Bonus, Sweat Equity, ESOP and Buy-back of Shares

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

Writing off the commission paid on an issue of shares is permitted. Section 52(2) lists this among the permitted uses of the securities premium account, along with bonus shares, preliminary expenses, redemption premium and buy-back, whereas dividends, loss write-offs and asset purchases are not listed.

  1. APaying dividend to equity shareholders
  2. BWriting off the commission paid on an issue of sharesCorrect
  3. CWriting off accumulated losses of the company
  4. DPurchasing fixed assets for the business

Explanation

Section 52(2) permits applying the securities premium account for bonus shares, preliminary expenses, expenses, commission or discount on issue of shares or debentures, premium on redemption of preference shares or debentures, and buy-back under section 68. Dividend, writing off losses and buying assets are not listed.

Did you get it right without looking?

One question tells you little. A timed set on Issue, Forfeiture, Rights, Bonus, Sweat Equity, ESOP and Buy-back of Shares shows your real accuracy, how long you take and where you lose marks.

Practise Issue, Forfeiture, Rights, Bonus, Sweat Equity, ESOP and Buy-back of SharesFree diagnostic mock

More Issue, Forfeiture, Rights, Bonus, Sweat Equity, ESOP and Buy-back of Shares questions