Accounting Online Program Certification Practice Test

What are the balances on share capital and share premium for the year ended 30 June 20X6 after the transactions?

1. Share capital £210 million, Share premium £60 million

2. Share capital £200 million, Share premium £80 million

3. Share capital £190 million, Share premium £90 million

4. Share capital £220 million, Share premium £50 million

The correct answer is: Share capital £210 million, Share premium £60 million

To understand why the answer indicates share capital of £210 million and share premium of £60 million, it's important to have a clear grasp of how share capital and share premium are calculated and the underlying transactions influencing these amounts. Share capital generally refers to the value of the shares that have been issued by the company. It typically reflects the nominal value or par value of those shares. The share premium, on the other hand, is the amount received over and above the nominal value of shares issued. In this scenario, if the transactions led to the issuance of new shares or adjustments in share values that resulted in a total share capital of £210 million, we can assume this might come from the total nominal values of newly issued shares or a review of past figure adjustments. Additionally, if the share premium is identified as £60 million, this indicates that shares were sold at a price above their nominal value, resulting in this additional capital. The figures directly summarize the net effect of all transactions related to share issuance during the financial year leading up to 30 June 20X6. Therefore, the calculated and reported balances reflect both the total share capital after any new issues or adjustments and the premium received from those shares above their par value, culminating in the specified amounts