Multiple choice

Directions: Choose the correct option for the given question.

For what purposes, share premium account can be used?

  1. To conduct the bonus issue

  2. To write off the preliminary expenses

  3. To write off discount on issue of shares

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Share Premium (Securities Premium) can be used for: (1) Issuing fully paid bonus shares - the premium capitalizes free shares, (2) Writing off preliminary expenses of incorporation, and (3) Writing off discount or commission on issue of shares/debentures. These are the only statutory uses under company law - it cannot be distributed as dividend.

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