Issue of Shares at Premium
When shares are issued at a price higher than the face value, they are said to be issued at premium. Generally premium is included in the allotment money. In such a case the Journal entry is.
Share Allotment A/c Dr.
To Share Capital A/c To Share Premium A/c
(with the amount due one allotment
including Premium)
(with share money)
(with Premium money)
Capital IQ Interview Questions and Answers
Share Premium Account appears in balance sheet under Reserves and Surplus
According to Sec.78 of the Companies Act. 1956, the Share Premium (or Securities Premium) may be applied for the following purposes:
(i) To issue fully paid bonus shares to the members.
ii) To write off preliminary expenses of the company.
(iii) To write off the expenses of or the commission paid or discount allowed on any issue of shares or debentures of the company.
(iv) To provide for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company.
Issue of shares at Discount
When shares are issued at a price lower than the face value, they are said to be issued at a discount. The discount on issue of shares must be treated as a loss of capital nature and not of revenue nature. According to Sec. 79 of the Companies Act, 1956 a company may issue the shares at a discount only if the following conditions are fulfilled.
(i) The share must belong to a class already issued.
ii) The issue must be authorised by an ordinary resolution of the company.
iii) The sanction of the Company Law Board must be obtained.
iv) The resolution must specify the maximum rate of discount at which the shares are to be issued.
v) At least one year must have elapsed since the date on which the Company was entitled to commence business.
When shares are issued at a price higher than the face value, they are said to be issued at premium. Generally premium is included in the allotment money. In such a case the Journal entry is.
Share Allotment A/c Dr.
To Share Capital A/c To Share Premium A/c
(with the amount due one allotment
including Premium)
(with share money)
(with Premium money)
Capital IQ Interview Questions and Answers
Share Premium Account appears in balance sheet under Reserves and Surplus
According to Sec.78 of the Companies Act. 1956, the Share Premium (or Securities Premium) may be applied for the following purposes:
(i) To issue fully paid bonus shares to the members.
ii) To write off preliminary expenses of the company.
(iii) To write off the expenses of or the commission paid or discount allowed on any issue of shares or debentures of the company.
(iv) To provide for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company.
Issue of shares at Discount
When shares are issued at a price lower than the face value, they are said to be issued at a discount. The discount on issue of shares must be treated as a loss of capital nature and not of revenue nature. According to Sec. 79 of the Companies Act, 1956 a company may issue the shares at a discount only if the following conditions are fulfilled.
(i) The share must belong to a class already issued.
ii) The issue must be authorised by an ordinary resolution of the company.
iii) The sanction of the Company Law Board must be obtained.
iv) The resolution must specify the maximum rate of discount at which the shares are to be issued.
v) At least one year must have elapsed since the date on which the Company was entitled to commence business.
1 comment:
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