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The excess price received over the par value of shares, should be credited to __________.
- a)Calls-in-advance account
- b)Share capital account
- c)Securities premium account
- d)Reserve capital account
Correct answer is option 'C'. Can you explain this answer?
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The excess price received over the par value of shares, should be cred...
Explanation:
When a company issues shares at a price higher than its par value, the excess amount received is known as securities premium. This premium cannot be treated as a part of the share capital as it does not represent a return on the investment made by the shareholders. Therefore, it should be credited to the securities premium account.
The securities premium account is a part of the shareholders' funds and is shown on the liabilities side of the balance sheet. It represents the amount received by the company in excess of the par value of shares and can be utilized only for certain purposes such as:
- To issue bonus shares to the existing shareholders
- To write off the preliminary expenses or the expenses incurred on the issue of shares
- To write off the discount allowed on the issue of shares or debentures
- To provide for the redemption of preference shares or debentures
Thus, the excess price received over the par value of shares should be credited to the securities premium account.
When a company issues shares at a price higher than its par value, the excess amount received is known as securities premium. This premium cannot be treated as a part of the share capital as it does not represent a return on the investment made by the shareholders. Therefore, it should be credited to the securities premium account.
The securities premium account is a part of the shareholders' funds and is shown on the liabilities side of the balance sheet. It represents the amount received by the company in excess of the par value of shares and can be utilized only for certain purposes such as:
- To issue bonus shares to the existing shareholders
- To write off the preliminary expenses or the expenses incurred on the issue of shares
- To write off the discount allowed on the issue of shares or debentures
- To provide for the redemption of preference shares or debentures
Thus, the excess price received over the par value of shares should be credited to the securities premium account.
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The excess price received over the par value of shares, should be cred...
The premium amount as we discussed is credited to the Securities Premium Account. This accountis found under the heading of Reserves and Surplus on the cannot exceed the limit of the unissued share capital of the company for shares issued at a premium will differ slightly than those issued at par.
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The excess price received over the par value of shares, should be credited to __________.a)Calls-in-advance accountb)Share capital accountc)Securities premium accountd)Reserve capital accountCorrect answer is option 'C'. Can you explain this answer?
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