[amp_mcq option1=”Writing-off discount on debenture” option2=”Writing-off preliminary expenses of company” option3=”Issue of bonus share” option4=”All of the above” correct=”option4″]
The correct answer is D. All of the above.
Share premium is the excess of the amount received for a share over its face value. It can be used for the following purposes:
- Writing-off discount on debentures: A discount on debentures is the difference between the face value of a debenture and the amount received for it. Share premium can be used to write off this discount.
- Writing-off preliminary expenses of a company: Preliminary expenses are the expenses incurred by a company before it starts its business. Share premium can be used to write off these expenses.
- Issue of bonus shares: Bonus shares are shares issued to existing shareholders without any additional payment. Share premium can be used to finance the issue of bonus shares.
Share premium is a reserve of a company and cannot be distributed to shareholders as dividends. It can only be used for the purposes mentioned above.