CHAPTER 7 : ACCOUNTING FOR SHARE CAPITAL

TRUE- FALSE QUESTIONS

1 The amount of application money received is transferred to share capital account on the
date of receipt of application money. (True or False)
2. A company cannot issue shares at a discount. (True or False)
3. The dividend on equity shares is not fixed and it may vary from year to year depending
upon the amount of net profits available for distribution. (True or False)
4. Issued capital is that part of authorized capital which is actually issued to the public only.
(True or False)
5. The director of the company must be a shareholder. (True or False)
6 Capital Reserves are created from capital profits.(T/F) Answer: True
7.Maximum amount of discount allowed at the time of reissue of forfeited
shares should not exceed the forfeited amount.(T/F) Answer: True
8.Minimum amount at which share can be reissued is the amount received at the
time of forfeiture of shares.(T/F) Answer: False
9.The directors always reissue forfeited shares.(T/F) Answer: False
10. When a part of the forfeited share are reissued , the whole balance of share
forfeited account will be transferred to the capital reserve.(T/F) Answer: False

11.Subscribed capital can be less or equal to Issued capital but cannot be more than
Issued capital.
12.Underwriting commission can be paid by issuing shares also.
13.Excess of purchase consideration over net assets at the time of purchase of business
is credited in capital reserve.
14.The maximum rate of divided on equity shares is 20%.
15.Reserve capital cannot be called during the life of the compay except its liquidation.

16.Re-issue of forfeited shares is allotment of shares but not a sale.

17.Forfeited shares are reissued at discount only
18.Pro-rata allotment is possible only in case of over subscription.
19.A company can forfeit only those shares on which calls are unpaid.
20.Capital Reserve and Reserve Capital are same.

21.A Company can issue shares more than its Authorized Capital
22.Securities Premium Reserve can be shown in Balance Sheet
23.When 90% of the issued shares are subscribed by the public it is
known As over subscription of shares.

24.Capital Reserve is a Part of Authorized Capital Of a Company

KVS ZIET 12/10/2021 Page 1

BHUBANESWAR
25.Equity share capital is also known as Risk Capital of a Company

Q26. Pro rata allotment of shares means proportionate allotment of shares due
to oversubscription of shares.

True / False

Ans A. True.

Q27. Forfeited shares cannot be rescheduled at premium.

A. True
B. False

Ans B False

Q28. Profit on re issue of forfeited shares is transferredIn case of shares

issued on Pro–rata basis, excess money received at the time of application
can be utilised till allotment only.

A True
B False
Ans B False

29.Reserve Capital is not a part of Authorised capital

30.Shares for which amount is paid by public are called paid up shares.
31.Money received in advance from shareholders before it is actually called-up by the
directors
32.Authorised capital is not shown in company’s Balance Sheet:
33.Voluntary return of shares for cancellation by the shareholders is called forfeiture
34.If a share of ` 10 issued at a premium of ` 3 on which the full amount has been
called is forfeited the capital
account should be debited with Rs.5
35.When a company issue its share through IPO, it means shares are issued to general
public
36.Company formed by special acts is called.statutory co.
37.Shareholder gets dividend in return for their investment?
38.If discount on reissue of share is less than the amount forfeited, the surplus is
transferred to capital reserve ?
 39. Re-issue of forfeited shares is allotment of shares but not a
sale. (True/False).
40. A public Company forfeits share on non-payment of final call
only. (True/False).
41. Share forfeited balance is transferred to Capital
Reserve. (True/False).
42. Balance in forfeited shares Account is shown in the balance sheet under
the head of Share Capital.
(True/False).
43. When shares are forfeited, Share Capital Account is debited with called-
up share capital.
(True/False).

ANSWER KEY
TRUE- FALSE QUESTIONS:

1. False
2. False
3. True
4. False
5. True

True False Questions

6 True
7 True
8 False
9 False
10 True
11. False –reissue is treated as sale because these shares were already allotted.
12. False- reissue can be made on discount as well as on premium.
13. True- pro rata allotment is possible in case of over subscription only.
14. True- only defaulter’s share can be forfeited.
15. False- capital reserve is a capital profit whereas reserve capital is part of capital.
16 FALSE
17 TURE
18 FALSE
19 FALSE
20 TURE
 False
21
True
22
True
23
False
24
False
25
False
26
27 True
True
28
29 True
30 True
31 False
32 False
33 True
34 True
35 True
36 False
37 False
38 True
39 False
40 True
41 True
42 True
43 False

PREPARED BY THE PGTs ( COMMERCE ) OF BHUBANESWAR,

GUWAHATI, KOLKATA, RANCHI, SILCHAR AND TINSUKIA REGIONS.