When ordinary shares are issued for more than their nominal value, the excess amount is normally credited to which account?
Correct answer: B. Share premium account
- A. General reserve
- B. Share premium account
- C. Retained earnings account
- D. Revaluation surplus account
Explanation
The amount received above the nominal value of issued shares is called share premium or securities premium. It is recorded separately from ordinary share capital and is not normally treated as trading profit.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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