How do you audit share premium?

How do you audit share premium account?

(i) The auditor should examine the Prospectus, the Articles and the Minutes of the Directors to see whether the issue of shares at a premium is duly authorized or not. He should confirm the rate of premium. (ii) The receipt of the premium is vouched with the entries in the Cash Book and the supporting documents.

How is share premium recorded?

A share premium account is recorded in the shareholders’ equity portion of the balance sheet. The share premium account represents the difference between the par value of the shares issued and the subscription or issue price. … Share premium can be money received for the sale of either common or preferred stock.

Where does share premium go in balance sheet?

A share premium account appears in the shareholders’ equity section of the balance sheet.

How do you audit shares?

Audit Procedures for Share Capital

  1. Obtain the client’s articles of incorporation, bylaws and board meeting minutes.
  2. Agree the authorized share capital to the supporting documents above.
  3. Reconcile the authorized share capital with the general ledger.
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What is the auditors duty when share are issued at premium?

The auditor should, first of all, examine the Articles of Association of the company to ensure such an issue is authorized by the Articles. The issue should be vouched and he should check the necessary records made in the books of accounts in this connection.

Why do companies issue shares at premium?

A company issues its shares at a premium when the price at which it sells the shares is higher than their par value. This is quite common, since the par value is typically set at a minimal value, such as $0.01 per share. The amount of the premium is the difference between the par value and the selling price.

What is share issued at premium?

When shares are issued at a price higher than the face value, they are said to be issued at a premium. Thus, the excess of issue price over the face value is the amount of premium. … the premium on issue of shares must not be treated as revenue profits.

How is year end share premium calculated?

For example, XYZ Company issued 500 shares at $15 per share having a par value of $10 per share.

  1. The share premium per share = $15 – $10 = $5.
  2. So total share premium is $5*500 = $2500.

What happens to share premium on liquidation?

The proceeds are left in the company to reinvest or draw on as they wish, as basic rate dividends and a personal allowance level salary to withdraw funds tax free.

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How can I reduce my share premium account?

There are a few steps to go through, in summary these are:

  1. Ensure the company’s articles allow a capital reduction.
  2. All directors must sign a solvency statement.
  3. Shareholders must approve the capital reduction via a special resolution (needing 75% of the votes) within 15 days of the solvency statement date.

Can you use share premium to buy back shares?

In accordance with article 3 of the Companies (Reduction of Share Capital) Order (SI 2008/1915), the reserve created on such reduction can be treated as a realised profit and, therefore, it may be distributed to shareholders or used to buy back shares.

Does share premium still exist?

A share premium is the amount received by a company over and above the par value of its shares. This amount typically forms a part of the non-distributable reserves of the firm. 2. … The effect of The Companies Act No 71 of 2008 is that a share premium will no longer be applicable.

What is the objective of stock audit?

The objective of conducting a stock audit is to ensure the security of funds that are lent by the bank, being safe and valued correctly. Inventory Audit also known as stock audit where the evaluation is done for raw materials that gets converted to finished goods.