Securities premium can be utilized for:

(A) Writing of preliminary expenses.

(B) Issue of bonus share.

(C) Payment of dividends.

(D) Buy back of shares.

Choose the correct answer from the options given below:

(A), (B) and (D) only

The correct answer is option 1- (A), (B) and (D) only.

Except Payment of dividends, Securities premium can be utilised for all other given purpose.

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;
(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).