When shares are issued at a price higher than their nominal value, the excess amount is credited to a separate account known as the Securities Premium Reserve Account. This account is shown under 'Reserves and Surpluses' in the Equity and Liabilities section of the company's balance sheet. The use of this amount is strictly regulated by law for specific purposes.

Firstly, the amount can be used to issue fully paid bonus shares to the shareholders, to the extent that it does not exceed the unissued share capital of the company. Secondly, it can be utilised to write-off the preliminary expenses of the company, which are the costs incurred during its formation.

Furthermore, the securities premium amount can be applied to write-off the expenses of, or the commission paid, or the discount allowed on any securities of the company. It is also permissible to use this amount to pay the premium on the redemption of preference shares or debentures of the company.

Finally, the company can use the securities premium for the purchase of its own shares, a process commonly referred to as the buy-back of shares. These five purposes are the only authorised uses for the securities premium account.