Is share premium a debit or credit?

Is share premium a current asset?

Other Non-Current Liabilities:

General Reserve, Capital Reserve, Securities Premium, Forfeited Share Account, Dividend Equalization Fund, Sinking Fund, etc.

What is share premium for?

Share premium is a non-distributable reserve. … Share premium can usually be used for paying equity related expenses such as underwriter’s fees. It can also be used to issue bonus shares to the shareholders. The costs and expenses relating to issuance of new shares can also be paid from the share premium.

Is share premium a capital gain?

Share premium is generally considered as a capital receipt under Income-tax Act, 1961: Share issued at a premium by closely held companies subject to some exceptions are covered under Section 56 (vii(b)). … In case of issue of shares at a premium by listed companies, share premium shall not be considered as income.

Is share premium a free reserve?

Share premium: Though , as per definition of ‘free reserves’ , share premium is not ‘free reserve‘ because dividend cannot be declared out of share premium. However, ‘share premium’ is considered just like free reserves for many of purposes as per specific provisions.

How is share premium calculated in accounting?

Shares are considered to be issued at a premium if the amount received for issued shares is greater than the face value of shares. The premium is calculated by finding the difference between the share issue price and the par value of shares offered for sale.

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What is issue of premium shares?

When shares are issued at a price higher than the face value, they are said to be issued at a premium. Thus, the excess of issue price over the face value is the amount of premium. … the premium on issue of shares must not be treated as revenue profits.

What is meant by share premium answer in one sentence?

Securities premium or share premium refers to the amount received in excess of the face value of the share. For example, if a share with face value Rs 10 is issued at Rs 12, the amount of premium per share is Rs 2.

What type of account is share allotment?

Share Application or share allotment or Share capital A/c all are personal accounts as they represent money from the shareholders and when money is due, these are to be debited because of the rule “Debit the receiver”.

Why do companies issue shares at premium?

A company issues its shares at a premium when the price at which it sells the shares is higher than their par value. This is quite common, since the par value is typically set at a minimal value, such as $0.01 per share. The amount of the premium is the difference between the par value and the selling price.