Writing-off discount on debenture
Writing-off preliminary expenses of company
Issue of bonus share
All of the above
Answer is Wrong!
Answer is Right!
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.