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Mumbai University · FY LLB · Sem II
Explain application of premiums received on issue of shares.
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Explain application of premiums received on issue of shares.
Q1Short Answers — Answer in not more than two sentencesAttempt Any Six • 2 marks each • Total: 12 marks2023
(b)Explain application of premiums received on issue of shares.

When a company issues shares at a price above their face value, the excess amount is called Securities Premium and must be credited to the Securities Premium Account under Section 52. This account can be applied only for specified purposes: issuing fully paid bonus shares, writing off preliminary expenses, writing off expenses/discount on issue of shares or debentures, buying back shares, or providing premium payable on redemption of preference shares or debentures — it cannot be distributed as dividend.