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Question
Write a short note on the securities premium account.
Solution
When a company issues shares at a price more than the face value (nominal value), the shares are said to be issued at a premium. The excess is called a premium amount and is transferred to a securities premium account. Securities premium account is shown under reserves and surplus as a separate head in the Note to Account to the balance sheet.
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Applications were received for 70,000 shares. Applications for 8,000 shares were rejected and allotment was made proportionately towards the remaining applications. The directories made both the calls and all the amounts were received except the final call on 1,500 shares which were subsequently forfeited. Later 1.200 forfeited shares were reissued by receiving ₹ 8 per share. Give journal entries.
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