CSEET · Fundamentals of Accounting · Introduction to Company Accounts
Under the Companies Act, 2013, where a company issues shares at a premium, the amount of premium received must be credited to which account?
The premium received on shares issued must be transferred to the Securities Premium Account. The Act requires a sum equal to the total premium received to go there, and it is treated like paid-up share capital for reduction purposes, so it is not revenue profit or a general reserve.
- ASecurities Premium AccountCorrect
- BGeneral Reserve
- CCapital Redemption Reserve Account
- DProfit and Loss Account
Explanation
The Act requires a sum equal to the aggregate premium received on shares to be transferred to a securities premium account. It is not treated as revenue profit, so it does not go to the Profit and Loss Account or General Reserve. Capital Redemption Reserve arises on redemption of preference shares out of profits, which is a different matter.
Did you get it right without looking?
One question tells you little. A timed set on Introduction to Company Accounts shows your real accuracy, how long you take and where you lose marks.
More Introduction to Company Accounts questions
- Under Section 71 of the Companies Act, 2013, what must a company do before making an offer or invitation to the public or to more than five …
- Sundaram Ltd. forfeited 100 equity shares of Rs 10 each, Rs 8 called up, on which the holder had paid only Rs 5 per share (application and a…
- Under Section 71 of the Companies Act, 2013, which of the following is true about debentures issued by a company?
- Under the Companies Act, 2013, what is the legal position of a share issued by a company at a discount, apart from the specific exception fo…
- Under the Companies Act, 2013 text given, a company may re-open its books of account or recast its financial statements only when:
- Kaveri Ltd issued 10,000 equity shares of Rs 100 each at a premium of Rs 20 per share, Rs 30 being payable on application, Rs 50 on allotmen…