Question

When a company issues shares at a premium, the company can collect securities premium along with the following:

• A. Application money.
• B. Allotment money.
• C. Call money.
• D. Any of the above.

Hint:

If a problem doesn't specify when the premium is collected, the standard accounting convention is to assume it is due along with the Allotment money.It can technically be any installment.

Answer 1

The Correct Option is D

Concept: A share premium (Securities Premium) occurs when a company issues shares at a price higher than their face value. While accounting textbooks often demonstrate the premium being collected during the allotment stage, there is no legal restriction under the Companies Act regarding which installment is used to collect this extra amount.

Step 1: Understanding the flexibility of premium collection.
Company has the discretion to structure its share issue installments based on its capital needs. The securities premium can be collected:
• On Application: To secure the premium amount immediately from interested investors.
• On Allotment: This is the most common practice in many accounting problems.
• On Calls: The company may choose to collect the premium in later stages alongside the final installments of the face value.

Step 2: Conclusion.
Since the premium can be legally and practically attached to any stage of the payment process, the company can collect it with application, allotment, or call money.