New SIDBI Grade A New Batch Starts on Nov 18

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    Question

    Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R). You are to examine these two statements carefully and select the answers using the code given below:

    Assertion (A): ‘Securities Premium Reserve’ can be distributed as dividend.

    Reason (R):Amount of securities premium reserve cannot be distributed as dividend. It can only be used for the purposes listed under section 52 of the Companies Act.

    A Both A and R are individually true and R is the correct explanation of A Correct Answer Incorrect Answer
    B Both A and R are individually true but R is not the correct explanation of A Correct Answer Incorrect Answer
    C A is true but R is false Correct Answer Incorrect Answer
    D A is false but R is true Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    The assertion that 'Securities Premium Reserve' can be distributed as dividend is false. According to section 52 of the Companies Act, the amount in the securities premium reserve cannot be distributed as dividends. It can only be used for specific purposes such as issuing fully paid bonus shares, writing off preliminary expenses, and buy-back of shares, among others. Therefore, the reason correctly explains that the securities premium reserve cannot be used for dividend distribution and can only be used for the specified purposes under section 52.

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