Issuing bonus shares
Writing off preliminary expenses
Writing off discount on issue of debentures
Paying cash dividend to shareholders
Answer is Right!
Answer is Wrong!
The correct answer is D. Paying cash dividend to shareholders.
Share premium is the excess amount received by a company for issuing shares above their face value. It is a part of the paid-up capital of a company. Share premium can be used for the following purposes:
- Issuing bonus shares: A company can use share premium to issue bonus shares to its existing shareholders. Bonus shares are issued without any additional payment from the shareholders.
- Writing off preliminary expenses: Preliminary expenses are the expenses incurred by a company before it starts its business. These expenses can be written off from share premium.
- Writing off discount on issue of debentures: Discount on issue of debentures is the difference between the face value of debentures and the amount received by the company on their issue. This discount can be written off from share premium.
- Paying cash dividend to shareholders: Share premium cannot be used for paying cash dividend to shareholders. This is because share premium is a part of the paid-up capital of a company and cannot be used for distribution to shareholders.
I hope this helps!