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According to Section 78 of the companies Act, the amount in the Securities Premium A/c cannot be used for the purpose of :
- a)Issued of fully paid bonus shares
- b)Writing off losses of the company
- c)Writing off preliminary expenses
- d)Writing off commission or discount on issues of shares
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
According to Section 78 of the companies Act, the amount in the Securi...
Explanation:
Section 78 of the Companies Act deals with the utilization of Securities Premium Account. According to this section, the amount in the Securities Premium A/c cannot be used for the purpose of writing off losses of the company. The Securities Premium Account is created when a company issues shares at a premium, i.e., at a price higher than the face value of the share. The premium amount received by the company is credited to the Securities Premium Account. This account can be used for the following purposes:
a) Issued of fully paid bonus shares - The Securities Premium Account can be used to issue fully paid bonus shares to the existing shareholders of the company.
b) Writing off preliminary expenses - The Securities Premium Account can be used to write off the preliminary expenses incurred by the company in setting up the business.
c) Writing off commission or discount on issues of shares - The Securities Premium Account can be used to write off the commission or discount given to the underwriters or brokers for the issue of shares.
d) Redemption of preference shares - The Securities Premium Account can be used to redeem the preference shares of the company.
However, the amount in the Securities Premium A/c cannot be used for the purpose of writing off losses of the company. This is because the Securities Premium Account is created out of the premium received on the issue of shares and not out of the profits earned by the company. Writing off losses from the Securities Premium Account would be equivalent to using the investors' money to cover the company's losses, which would be unfair to the investors.
In conclusion, the Securities Premium Account can be used for various purposes, but it cannot be used to write off the losses of the company.
Section 78 of the Companies Act deals with the utilization of Securities Premium Account. According to this section, the amount in the Securities Premium A/c cannot be used for the purpose of writing off losses of the company. The Securities Premium Account is created when a company issues shares at a premium, i.e., at a price higher than the face value of the share. The premium amount received by the company is credited to the Securities Premium Account. This account can be used for the following purposes:
a) Issued of fully paid bonus shares - The Securities Premium Account can be used to issue fully paid bonus shares to the existing shareholders of the company.
b) Writing off preliminary expenses - The Securities Premium Account can be used to write off the preliminary expenses incurred by the company in setting up the business.
c) Writing off commission or discount on issues of shares - The Securities Premium Account can be used to write off the commission or discount given to the underwriters or brokers for the issue of shares.
d) Redemption of preference shares - The Securities Premium Account can be used to redeem the preference shares of the company.
However, the amount in the Securities Premium A/c cannot be used for the purpose of writing off losses of the company. This is because the Securities Premium Account is created out of the premium received on the issue of shares and not out of the profits earned by the company. Writing off losses from the Securities Premium Account would be equivalent to using the investors' money to cover the company's losses, which would be unfair to the investors.
In conclusion, the Securities Premium Account can be used for various purposes, but it cannot be used to write off the losses of the company.
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According to Section 78 of the companies Act, the amount in the Securi...
As per section 52 of the companies act, 2013,Security premium may be used by the company :
1.To issue fully paid up bonus shares.
2.To write off preliminary expenses.
3.To write off commission, discount or expenses on issue of securities of the company.
4.To provide for the premium payable on the redemption of debentures or preference share capital.
5.On the purchase of own shares.
Option 2 does not lie in the given five bits.. Hence B is the answer.
1.To issue fully paid up bonus shares.
2.To write off preliminary expenses.
3.To write off commission, discount or expenses on issue of securities of the company.
4.To provide for the premium payable on the redemption of debentures or preference share capital.
5.On the purchase of own shares.
Option 2 does not lie in the given five bits.. Hence B is the answer.
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According to Section 78 of the companies Act, the amount in the Securities Premium A/c cannot be used for the purpose of :a)Issued of fully paid bonus sharesb)Writing off losses of the companyc)Writing off preliminary expensesd)Writing off commission or discount on issues of sharesCorrect answer is option 'B'. Can you explain this answer?
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According to Section 78 of the companies Act, the amount in the Securities Premium A/c cannot be used for the purpose of :a)Issued of fully paid bonus sharesb)Writing off losses of the companyc)Writing off preliminary expensesd)Writing off commission or discount on issues of sharesCorrect answer is option 'B'. Can you explain this answer?, a detailed solution for According to Section 78 of the companies Act, the amount in the Securities Premium A/c cannot be used for the purpose of :a)Issued of fully paid bonus sharesb)Writing off losses of the companyc)Writing off preliminary expensesd)Writing off commission or discount on issues of sharesCorrect answer is option 'B'. Can you explain this answer? has been provided alongside types of According to Section 78 of the companies Act, the amount in the Securities Premium A/c cannot be used for the purpose of :a)Issued of fully paid bonus sharesb)Writing off losses of the companyc)Writing off preliminary expensesd)Writing off commission or discount on issues of sharesCorrect answer is option 'B'. Can you explain this answer? theory, EduRev gives you an
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