SHARE PREMIUM ON BALANCE SHEET PLUS IS A

Audit assertions for share capital Existence: Share capital reported on the balance sheet really exists at the reporting date. All amounts have been received in lump sum. Answer: As an addition in the subscribed capital.

Share Premium Account is also known as Securities Premium Account.Share premium account. It is a statutory reserve which forms part of a companys non-distributable reserves.According to Indian Company Act 1956, the amount of security premium may be used only for the following purposes: That part of shareholders funds (shown separately on the balance sheet) formed of the premium paid for new shares above their nominal value. To write off the preliminary expenses of the company. To write off the expenses, commission or discount allowed on issued of shares or debentures of the company. Merger relief is a Companies Act relief from the creation of a share premium account on the issue of shares. Broadly, it applies where a company issues equity shares in consideration for the shares of another company (ie, a share for share exchange) where, as part of the arrangement, it secures at least a 90 equity holding in the other company.Share premium Capital surplus is a term that frequently appears as a balance sheet item as a component of shareholders equity.

The preference shares may be redeemed at par or at premium. As per the Companies Act, 1956, as amended in 1988, only preference shares which are redeemable within 10 years can be issued. To issue fully paid bonus shares to the shareholders of the company.Difference between premium received on shares and the premium received on issue of debenturesThere is a basic difference between the premium received on issue of shares and the premium received on issue of debentures that in former case the premium can be utilized for above mentioned purposes only while in later case the premium can be utilized by company in any manner it likes.Treatment of Share Premium Account in Final AccountsShare Premium Account is shown in liabilities side of balance sheet.

All moneys due on allotment and call were realised. Cash then received after satisfying amount due on application was applied towards allotment and call money and any balance was returned. A total of 93,200 shares were applied for and owing to this heavy oversubscription allotments were made as follows:Applicants for 21,500 (in respect of applications for 2,000 or more) received 10,200 shares.Applicants for 50,000 (in respect of application for 1,000 or more but less than 2,000) received 12,600 shares.Applicants for 21,100 (in respect of applications for less than 1,000) received 7,200 shares.

These shares of B were forfeited in the month of May 2012.Of the total shares forfeited, 1,500 were issued to X in June 2012, credited as fully paid at Rs. 20 each.All the above decisions were duly complied with according to the time schedule laid down.The amount due on the issue of fresh equity shares and on final call were duly received except from B, who has failed to pay the first call money on his 1,000 shares, has failed to pay the final call money also. 100 each at a premium of Rs. The company has decide to give one share of Rs. You are required to calculate the price of right if the market value of share at the time of announcement of right issue is Rs.

3, 00,000 preference shares into equity shares of Rs. The terms of issue provide for (a), the conversion of Rs. Issued 10,000 11% redeemable preference shares of Rs. 50,000 being the minimum the company requires for its trading operations.Draft journal entries in the books of the company to record these share capital transactions and prepare the balance sheet, in the form prescribed by the Companies Act 1956, immediately after redemption.X Co. As on December 31, 2011.The preference shares are to be redeemed on Januat 10 per cent premium.On January 1, 2012, a fresh issue of equity shares was made to the extent it is required under the Companies Act for the purpose of the redemption of preference shares.The shortfall in cash resources for the purpose of redemption after utilising the proceeds of fresh issue was met by raising a bank loan, the cash balance of Rs. Assume that the resources required for payment are available.The following is the balance sheet at Abhiprya Ltd.

21,000.Journalize since December 31, 2014. 1, 00,000 and P and L appropriation a/c Rs. 3, 00,000, securities premium a/c 50,000, general reserve, Rs. The company accordingly converts and redeems the preference shares.Just before redemption, the company reserve and surplus comprises: Capital redemption reserve, Rs.

20,000 will be met out of securities premium moneyвЂ”Rs. 2, 00,000Premium on redemption of preference shares (10%) = 20,000Premium on redemption of preference shares amounting to Rs. 40,000(vi) Fresh issue to be made at a discount of 10%Face value of preference shares to be redeemed = Rs. 60,000(iv) Balance on general reserve Rs. 2, 00,000(iii) Divisible profits available Rs.

70 paid up 2, 10,000Ordinary shares of Rs. As on Madisclosed the following information:7% redeemable preference shares of Rs. Nominal value of shares to be issued at a discount of 10%The balance sheet of B Co. 1, 05,000 have to be raised by making a fresh issue of shares. 95,000.Therefore, proceeds amounting to Rs. 5,000.Profits available for redemption of preference shares= Rs.

In order to carry out redemption of preference shares it was decided to issue sufficient number of equity shares of Rs. Decided to redeem their preference shares as on Maon which date their position was as under:The redemption of all preference shares is to be carried out at premium of 5 per cent. Pass necessary journal entries to record the transactions.X Co. 10 each at a premium of 10 per cent on April 7, 2012.The issue was fully subscribed and paid for on April 15, 2012, the company redeemed all the preference shares. The company made a first issue of 10,000 ordinary shares of Rs.

3, 00,000 has to be raised by making a fresh issue of equity shares.Required number of equity share to be issuedCash and bank account is prepared to find out cash and bank balance after redemption. Thus, profits available for redemption of preference shares (in the form of balance in dividend equalisation fund) are Rs. Pass journal entries to record the above transaction and prepare the balance sheet after redemption.First securities premium on redemption of preference shares has to be provided out of share premium money and dividend equalisation fund. The redemption was duly carried out. The new issue was fully subscribed and paid for.

Share Premium On Balance Sheet Plus Is A