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When shares are issued at value which is more than face value then it is called shares issued at premium.
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What is the share premium?
When shares are issued at price which is more than face value then issuance of shares is called issued at premium and that excess amount above face value is called share premium.
Why are shares issued at a premium?
Well the company wants to profit. And issuing shares at premium provides capital to the company without changing its equity capital.
What is security premium account?
(1) Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called "the1[securities] premium account"; and the provisions of this Act relating to the reduction of the 1[securities] capital of a company shall, except as provided in this section apply as if the 1[securities] premium account were paid-up 1[securities] capital of the company.(2) The 1[securities] premium account may, notwithstanding anything in sub-section (1), be applied by the company-(a) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares;(b) in writing off the preliminary expenses of the company;(c) in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; or(d) in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company.(3) Where a company has, before the commencement of this Act, issued any shares at a premium, this section shall apply as if the shares had been issued after the commencement of this Act:Provided that any part of the premiums which has been so applied that it does not at the commencement of this Act form an identifiable part of the company's reserves within the meaning of Schedule VI shall be disregarded in determining the sum to be included in the 1[securities] premium account.
What is the effect of a bonus issue on the share capital and share premium account?
Bonus shares increases the share capital while reduces the share premium account because amount of share premium is used to issue bonus shares.
What is the difference between preference shares and share premium?
Preference shares are paid to shareholders before common stock dividends are paid out. Share premium can not be distributed, however, but under certain circumstances can be reduced.
When company issues shares at a premium the amount of premium may be received by the company?
yes,the company can receive the amount of premium.
What is shares premium?
When shares are issued at price which is more than face value then issuance of shares is called issued at premium and that excess amount above face value is called share premium.
What is the share premium?
When shares are issued at price which is more than face value then issuance of shares is called issued at premium and that excess amount above face value is called share premium.
Why are shares issued at a premium?
Well the company wants to profit. And issuing shares at premium provides capital to the company without changing its equity capital.
What is share premium reserve?
Share premium occurs when a company sells its shares at a price higher than face value, meaning it earned more money than the share is stated to be worth. This excess money is held in reserve in a share premium account, and it can be used to pay equity related expenses, such as underwriting, or to issue bonus shares to stockholders.
What is security premium account?
(1) Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called "the1[securities] premium account"; and the provisions of this Act relating to the reduction of the 1[securities] capital of a company shall, except as provided in this section apply as if the 1[securities] premium account were paid-up 1[securities] capital of the company.(2) The 1[securities] premium account may, notwithstanding anything in sub-section (1), be applied by the company-(a) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares;(b) in writing off the preliminary expenses of the company;(c) in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; or(d) in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company.(3) Where a company has, before the commencement of this Act, issued any shares at a premium, this section shall apply as if the shares had been issued after the commencement of this Act:Provided that any part of the premiums which has been so applied that it does not at the commencement of this Act form an identifiable part of the company's reserves within the meaning of Schedule VI shall be disregarded in determining the sum to be included in the 1[securities] premium account.
What is the effect of a bonus issue on the share capital and share premium account?
Bonus shares increases the share capital while reduces the share premium account because amount of share premium is used to issue bonus shares.
If forfeiture share is reissued at premium then why security premium is credited?
in case the shares have been issued at a premium and the amount of premium has been received then at the time of forfeiture of such share
What are the uses of share premium?
Share premium is used for many purposes and 1 of them is redemption of preference shares and debentures
What is the difference between preference shares and share premium?
Preference shares are paid to shareholders before common stock dividends are paid out. Share premium can not be distributed, however, but under certain circumstances can be reduced.
What is security premium in management accounting?
Security premium in management accounting is the difference between the nominal value and the selling price of shares.
Why shares issued at premium?
In case the shares have been issued at a premium and the amount of premium has been received then at the time of forfeiture of such share (a) share premium account should be debited (b) share premium account should be credited (c) share premium account should be neither debited nor credited (d) none of these
