DETAILS OF SCURITY PREMIUM ACCOUNT

                        DETAILS OF SCURITY PREMIUM ACCOUNT:

As the name suggest this account is created out of premium received by the issue of security at premium. In accordance of companies act premium received should be stored in a separate account which is known as security premium account. Amount stored in security premium account is capital in nature so such amount shall not be used except as provided in the act. Security premium account is shown at the liability side under reserve and surplus.

UTILISATION OF SECURITY PREMIUM:

In accordance with the companies act 2013 following are the purpose for which amount deposited in the security premium account can be used.

1.       Issue of fully paid bonus share.

2.       Write of preliminary expenses.

3.       Buy back of equity share.

4.       Commission paid or discount allowed or the issue of share or debenture.

5.       Providing premium during the redemption of redeemable preference shares or debenture.

Any premium paid does not give the shareholder any preferential rights in case of a winding up. Monies in the securities premium account cannot be treated as free reserves, as they are in the nature of capital reserve. Section 52 of the companies act 2013 and a few subsection has stated the detailed provision regarding security premium.