payment of dividend
writing off discount on issue of shares
issue of fully paid-up bonus share
capital losses
Answer is Right!
Answer is Wrong!
The correct answer is: D. capital losses
Section 52 of the Companies Act, 2013 states that the balance in the Security Premium Account can be utilized for the following purposes:
- Payment of dividend
- Writing off discount on issue of shares
- Issue of fully paid-up bonus shares
The balance in the Security Premium Account cannot be utilized for capital losses. This is because capital losses are losses that a company incurs when it sells an asset for less than its book value. The Security Premium Account is a reserve account that is used to record the premium that a company receives when it issues shares above their par value. The premium is a capital gain for the company, and it cannot be used to offset capital losses.
Here is a brief explanation of each option:
- Option A: Payment of dividend. The balance in the Security Premium Account can be used to pay dividends to shareholders. This is because the premium is a capital gain for the company, and it can be used to distribute profits to shareholders.
- Option B: Writing off discount on issue of shares. The balance in the Security Premium Account can be used to write off the discount on issue of shares. This is because the discount is a capital loss for the company, and it can be used to reduce the company’s net worth.
- Option C: Issue of fully paid-up bonus shares. The balance in the Security Premium Account can be used to issue fully paid-up bonus shares to shareholders. This is because the premium is a capital gain for the company, and it can be used to increase the company’s share capital.
- Option D: Capital losses. The balance in the Security Premium Account cannot be used for capital losses. This is because capital losses are losses that a company incurs when it sells an asset for less than its book value. The Security Premium Account is a reserve account that is used to record the premium that a company receives when it issues shares above their par value. The premium is a capital gain for the company, and it cannot be used to offset capital losses.