What Is Share Premium Account

The par value of the shares is the nominal capital of the company.

What is share premium account. The funds that are maintained in this type of account can be used for a variety of purposes such as underwriting costs. The costs and expenses relating to issuance of new shares can also be paid from the share premium. Share premium can only be used for certain specific purposes that are laid out in the corporation s bylaws. Issuing shares at a premium is a commonly used practice as par value is often set at a minimum level and does not reflect the.

The shares are said to be issued at a premium when the issue price of the share is greater than its face value or par value. The amount of share premium is presented in the balance sheet as part of the equity. It is a statutory reserve which forms part of a company s non distributable reserves. Share premium can usually be used for paying equity related expenses such as underwriter s fees.

The ending balance of the share premium account is recorded in the statement of financial position after the share capital. What is shares premium account. That part of shareholders funds shown separately on the balance sheet formed of the premium paid for new shares above their nominal value. The share premium can be money received for the sale of either common or preferred stock a balance is recorded in this account only when there s a direct share sale from the company usually from.

The amount that is over and above par value on the amount that has been subscribed to for a new issue of corporate capital. Share premium is the difference between the issue price and the par value of the stock and is also known as securities premium. A share premium account is a type of business account that is often included on a company balance sheet the purpose of the account is to provide a means of posting payments received by a shareholder for shares issued when those payments exceed the actual cost of the share. Share premium account companies act 2013 uses of share premium securities premium account companies act 2013 what are the purpose for which shares premium amount can be utilized uses of share premium account utilisation of share premium.

Share premium account may also be known as additional paid in capital and can also be called paid in capital in excess of par value. Share premium is the additional amount of funds received exceeding the par value of security.