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Accounting treatment for opening balance of securities premium reflecting since 5 years in balance sheet and company is having losses
Dear Sir,
With ref. to above subject, on of My Clients Company is having accumulated Losses since 5-6 Years which are more than securities premium account. For Example from 5-6 Years, the securities premium account is reflecting Rs. 100 and losses are reflecting 200. My Query is whether should i show both securities premium ac and P&L reserves separately or should i combined both and transfer Securities premium to reserves. Which is the correct accounting treatment? Any case law, acconting guidelines on it??
Please help.
Thank You
Replies (2)
You should show them separately under the head 'Reserves and Surplus'. You are not permitted to transfer Securities Premium to your Profit and Loss Account. As per the Companies Act, the amount in Securities Premium can be transferred only in case of : 1. Bonus Issue 2. Write off Premilinary Expenses 3. Write off Underwriting Commission 4. Premium on Redemption of Preference Shares/Debentures 5. Buy Back of Shares.
In any other case, securities premium account shall not be written down.
Thanks Alot!!! Dear Kaushik.
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