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.
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