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JAMB Principles of Accounts 1997 Question 41

Question 41

Company Accounts

Share premium can be used to
I write off discount on shares
II give loans to directors
III pay dividends
IV pay company's formation expenses.

  1. A.I and IV only
  2. B.I and III only
  3. C.II and III only
  4. D.III and IV only.
Show the answer and explanation

Answer: A (I and IV only)

Explanation

The law allows share premium to write off discounts on shares and formation (preliminary) expenses, but not to pay dividends or lend to directors.