When the company issueiãres at the amount more than the face value or par value, then it is said to be issued share at premium.
For eg. The face value of share of ‘Company A’ is 10. When issued for 12 then 2 is termed as the premium charged. Normally, the company with good prestige and well developed companies issue share at a premium. Share capital is a gain for the company. The amount of security premium can be utiised by the company as under:
(i) To issue bonus share on fully paid up shares.
(ii) To write off preliminary expenses of the company.
(iii) To write off the amount of redeemed premium if debentures are to be redeemed with premium. (iv) Expenses made during the issue of shares or debentures by the company, to write off discount or under writing commission or brokerage expenses.