A Company can utilise securities premium for which of the following purposes?
Answer & explanation
Correct answer: option 3
The premium amount is credited to a separate account called ‘Securities Premium Account’ and is shown under the title ‘Equity and Liabilities’ of the company’s balance sheet under the head ‘Reserves and Surpluses’. It can be used only for the following five purposes:
(a) to issue fully paid bonus shares to the extent not exceeding unissued share capital of the company;
(b) to write-off preliminary expenses of the company;
(c) to write-off the expenses of, or commission paid, or discount allowed on any securities of the company; and
(d) to pay premium on the redemption of preference shares or debentures of the company
e) Purchase of its own shares (i.e., buy back of shares).
(a) to issue fully paid bonus shares to the extent not exceeding unissued share capital of the company;
(b) to write-off preliminary expenses of the company;
(c) to write-off the expenses of, or commission paid, or discount allowed on any securities of the company; and
(d) to pay premium on the redemption of preference shares or debentures of the company
e) Purchase of its own shares (i.e., buy back of shares).