Share premium is classified in the balance sheet as
Answer Details
Share premium is classified as a type of capital reserve in the balance sheet.
Share premium is the excess amount that a company receives from issuing shares to investors over and above the nominal or face value of the shares. This additional amount is considered to be a part of the company's equity capital, but it is not considered to be a part of the company's profits. Therefore, it is treated as a capital reserve.
Capital reserves are reserves that are created from non-trading activities of a company. They are typically created when a company generates profits that are not distributable as dividends to shareholders. These reserves can be used for a variety of purposes, such as to issue bonus shares, to write off capital expenses, or to pay off debts.
Therefore, share premium is classified as a capital reserve in the balance sheet because it represents an amount that is in excess of the nominal or face value of the shares and is considered to be a part of the company's equity capital, but it is not considered to be a part of the company's profits.