CSEET · Fundamentals of Accounting · Introduction to Company Accounts
Which of the following is a permitted application of the Securities Premium Account under the Companies Act, 2013?
Writing off preliminary expenses is a permitted use of the Securities Premium Account. The Act allows it for fully paid bonus shares, preliminary expenses, issue expenses or commission, redemption premium and buy-back, but not for dividends, absorbing past losses or buying assets.
- AWriting off preliminary expenses of the companyCorrect
- BPaying dividend to equity shareholders
- CWriting off accumulated losses of earlier years
- DPurchasing plant and machinery
Explanation
Section 52(2) lists permitted uses including bonus shares, writing off preliminary expenses, writing off share or debenture issue expenses, commission or discount, premium on redemption of redeemable preference shares or debentures, and buy-back. Dividend, absorbing accumulated losses and buying assets are not listed.
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