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CS Executive · Corporate Accounting and Financial Management · Accounting for Share Capital

Which of the following is a purpose for which the securities premium account may be applied under section 52(2) of the Companies Act, 2013?

The securities premium account may be used to write off commission paid on an issue of shares, as permitted by section 52(2)(c). The section lists specific permitted uses such as bonus shares, preliminary expenses, issue expenses, redemption premium and buy-back. Dividends, trading losses and goodwill are not among them.

  1. APaying dividend to equity shareholders
  2. BWriting off the commission paid on an issue of sharesCorrect
  3. CWriting off accumulated trading losses
  4. DWriting off the cost of acquiring goodwill

Explanation

Section 52(2)(c) allows application of the premium account in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures. Dividend payment, trading losses and goodwill are not permitted applications listed in the section.

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