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.

Hint:

Refer to Section 52 of the Companies Act, 2013 to understand permissible uses of the Securities Premium Account.

Answer 1

The Correct Option is B

Under the Companies Act, 2013, the Securities Premium Account is designated for specific uses including the issuance of bonus shares, amortization of preliminary expenses, and covering premiums on the redemption of preference shares and debentures. A loss incurred from the sale of a fixed asset is not an eligible expenditure for this account.