CBSE 2024, Set 3

Question

Assertion (A): Securities Premium cannot be utilized for writing off loss on sale of a fixed asset.
Reason (R): Securities Premium can be applied only for the purposes mentioned in the Companies Act, 2013.
Choose the correct option from the following: A). Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct reason of Assertion (A). B). Both Assertion (A) and Reason (R) are true and Reason (R) is the correct reason of Assertion (A). C). Both Assertion (A) and Reason (R) are false. D). Assertion (A) is false, but Reason (R) is true.

Edvaya · Accepted Answer

The correct answer is Both Assertion (A) and Reason (R) are true and Reason (R) is the correct reason of Assertion (A).. Under Section 52(2) of the Companies Act, 2013, Securities Premium can only be used for five specific purposes (e.g., issuing bonus shares, writing off preliminary expenses, writing off discount on issue of securities, providing for premium on redemption, buy-back of shares). It cannot be used to write off capital losses like loss on the sale of a fixed asset. Hence both statements are correct, and R explains A.

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Accountancy > Accounting For Companies > Accounting For Share Capital

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