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Which account is credited when a company issues shares at a premium?

easy MCQ 1 mark Class 12 · Accountancy · Accounting for Share Capital
  1. Share Capital
  2. Share Premium
  3. Discount on Issue
  4. Capital Reserve
Answer
Share Premium

The correct answer is Share Premium — This is in accordance with the provisions of Companies Act and standard accounting practice.

Step-by-step solution

  1. When the issue price exceeds the nominal value, the excess amount is not credited to Share Capital.
  2. Instead it is credited to the Share Premium account, which is part of Reserves and Surplus.
  3. Thus the correct answer is Share Premium.
  4. This is in accordance with the provisions of Companies Act and standard accounting practice.
Common mistake: Confusing Share Premium with Share Capital

Concept tested: Account credited for share premium

Published · How this solution was prepared and checked

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