Last week, in part one, we discussed the meaning of share
premium, the various ways a company may use share premium and its
importance when determining the assessable capital of a
company.
Today, we will discuss contributed surplus, another frequently
misunderstood concept which is distinct from and is not to be
confused with share premium.
Contributed surplus is defined under section 54(2) of the
Companies Act 1981, as amended, as including "proceeds arising
from donated shares, credits resulting from redemption or
conversion of shares at less than the amount set up as nominal
capital and donations of cash and other assets of the
company".
On the balance sheet of a company, contributed surplus appears
as a separate line entry on the equity side of the balance sheet
and is a quasi-equity account.
