The balance in the securities premium account can not be used ______?

The correct answer is Option (3) → To pay off the purchase consideration.

Securities premium is money received from shareholders over the face value of shares. It is a capital receipt, so the law does not let a company spend it like ordinary funds; it may be used only for the few purposes the Act names, all of them connected with the company’s own securities or capital-type expenses. Paying the purchase consideration for assets or a business is an ordinary payment to a vendor and is not one of those purposes, so the balance cannot be used for it.

Option (1) To write-off the expenses of preliminary expenses of the company — A permitted use of securities premium. Writing off preliminary expenses is one of the listed purposes.

Option (2) To issue fully paid bonus shares. — A permitted use of securities premium. Fully paid bonus shares (up to the unissued capital) may be issued out of it.

Option (4) To write off discount on issue of debentures. — A permitted use of securities premium. Debentures are securities, and writing off the discount allowed on any securities is a listed purpose.