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A share premium account is an account on a company's balance sheet that reflects the amount received from shareholders above the nominal value of the shares issued. When a company issues shares at a price higher than their par value, the excess amount contributes to the share premium account. This account is typically used for purposes such as funding expansion, paying off debts, or covering issuance costs. It is important to note that share premium is not available for distribution as dividends to shareholders.
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Issuing share 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
Can premium be written off to the share premium account?
no
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 Share premium?
the amount payable for a share above its nominal value. Most shares are issued at a premium to their nominal value. Share premiums are credited to the company's share premium account.
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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
Is share premium account and share application money same?
Share premium account is that amount in which amount in excess of par value of shares is received while share application accounts records all money received from potential investors in process of share issue.
Is share premium paid part of paid up capital?
Yes share premium paid is part of paid up capital and shown separately as share premium account in equity section of balance sheet.
What is the double entry for issue of shares?
The double entry for the issue of shares involves debiting the cash or bank account and crediting the share capital account. If shares are issued at a premium, the premium amount is credited to a separate account, often called the share premium account. This reflects the increase in equity and the cash inflow from shareholders.
What type of account is paid in capital in excess of par?
Paid in capital in excess of par is called "Share premium account"
How you treat decrease in share premium in cash flow statement?
Decrease in share premium account is shown under 'Cash flow from financing' activities as this is related with issuance and buy back of shares
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