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WAEC Financial Accounting 2011 Question 33

Question 33

Company Accounts

Which of the following is not a purpose for which share premium may be utilized?

  1. A.Issuing fully paid bonus shares
  2. B.Writing off preliminary expenses
  3. C.Settling salesmen commission
  4. D.Providing for redeemable preference shares
Show the answer and explanation

Answer: C (Settling salesmen commission)

Explanation

Share premium is a capital reserve; it cannot be used for ordinary running expenses like salesmen's commission.