Share Premium

Code: 3230
👁 Views: 157

Account Information

Financial Statement Statement of Financial Position
Normal Balance Credit

Definition

Represents the difference between the issue price and the nominal value of shares when shares are issued at a price higher than par value.

Common Journal Entries

Record share premium on issuance

Dr. Bank Account
Cr. Ordinary Shares
Cr. Share Premium

Use share premium to cover losses

Dr. Share Premium
Cr. Accumulated Losses

Issue bonus shares from premium

Dr. Share Premium
Cr. Ordinary Shares

Transfer premium to reserve

Dr. Share Premium
Cr. Legal Reserve

Record share premium on issuance

Dr. Bank Account
Cr. Ordinary Shares
Cr. Share Premium

Use share premium to cover losses

Dr. Share Premium
Cr. Accumulated Losses

Issue bonus shares from premium

Dr. Share Premium
Cr. Ordinary Shares

Transfer premium to reserve

Dr. Share Premium
Cr. Legal Reserve

📐 IFRS vs US GAAP Accounting Treatment

IFRS IAS 1 Presentation of Financial Statements
US GAAP ASC 505 Equity
⚠️ Key Difference Between IFRS and US GAAP

GAAP is called "Additional Paid-in Capital" (APIC) and has the same treatment with broader disclosure requirements.

❓ Frequently Asked Questions

Q: What is share premium?

A: The difference between the issue price and the par value of a share when issued at a price higher than par value.

Q: Can share premium be distributed as dividends?

A: No, share premium cannot be distributed as dividends; it is used for specific purposes such as covering losses or issuing bonus shares.