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Objective Based Questions
Objective Based Questions
Ans.
a. By purchasing its own shares (Buy-back)
(b) Issuing partly paid bonus shares to shareholders
the
Ans. (b) Authorised above
Capital
Q9.700 shares of 10 each reissued as7 9 paid up for7 Q18. Acompany is Capital > Issued Capital
were created by:
per share. Entry for reissue will be: a.
Special act of
b. Companies Actthe
a. Bank A/c
Share Discount A/c
Dr. 4.900
C. Investors
Parliament
Dr. 1,400
To Share Capital A/c d. Members
6,300
Ans. (6) Companies Act
a.Equity shares cannot be issued for the purpose of: d. All of the above
Cash Receipts b. Purchase of assets Ans. (d) All of the above
cRedemption of debentures d. Distribution of dividend Q30. In case of private placement of shares,the lock in periodis:
Ans. (d) Distribution of dividend
a. one year b. two years
g20. Acompany has. . C. three years d. None of these
a. separate legal entity b. perpetual existence Ans. (c) three years
c. limited liability d. All of these 31. Liability of a shareholder is limited to . of the shares
Ans. (d) All of these allotted to him.
g21 Which of the following is not shown under the heading' Share a. paid up value b. called up value
Capital' in a balance sheet? c. face value d. reserve price
a. Subscribed Capital b. Issued Capital Ans. (c) face value
c. Reserve Capital d. Authorised Capital Q32. Capital of a company is divided in units which is called:
Ans. (c) Reserve Capital a. Debenture b. Share
C. Stock d. Bond
g22. In case of private placement ofshares,to raise the amount of
capital a company: Ans. (b) Share
a. invites the public through prospectus Q33. Authorised capital ofa company is mentioned in:
b. does not invite the public a. Memorandum of Association
c. invites the public through advertisement b. Articles of Association
d. invites the public through Memorandum of Association C. Prospectus
Ans. (b) does not invite the public d. Statement in Lieu of Prospectus
Ans. (a) Memorandum of Association
Q23. Who are the real owners of a company?
a. Government b. Board of Directors Q34. The shares on which there is no any pre-fixed rate of dividend
c. Equity Shareholders d. Debentureholders is decided, but the rate of dividend is fluctuating every year
Ans. (c) Equity Shareholders according to the availability of profits, such share are called:
a. Equity Share
24. Acompany mayissue. b. Preference Shares
b. Non-cumulative Preference Share
a. Equity Shares . Non-convertible Preference Share
. Both a. and b. d. None of these
d. Non-guaranteed Preference Share
Ans. () Both a. and b.
Ans. (a) Equity Share
25. Reserve capital is: directors in
Q35. Shares issued bya company to its employees or
a. Subscribed Capital consideration of 'Intellectual Property Rights' are called:
b. Capital Reserve a. Right Equity Shares b. Private Equity Shares
C.Uncalled Capital be called only at the
.Sweat Equity Shares d. Bonus Equity Shares
d. Part of the uncalled capital which may Ans. (c) Sweat Equity Shares
time of liquidation of the company
be called only at the: 36. Public subscription of shares include:
Ans. (d) Part of the uncalled capital which may b. to receive applications
time of liquidation of the company a. to issue prospectus
C. to make allotment d. All of these
26. Reserve capital is a part of: Ans. (d) Al of these
a. Paid-up Capital Unless otherwise stated,a preference share is always deemed
b. Forfeited Share Capital Q37.
to be:
C. Assets of company a. cumulative, participating and non-convertible
on liquidation
Capital to be called-up only on liquidation of company
d. b. non-cumulative, non-participating and non-convertible
Ans. (d) Capital to be called-up only C.cumulative, non-participating and non-convertible
in a company is: d. non-cumulative, participating and non-convertible
27. The liability of members b. unlimited
a. limited Ans. () cumulative, non-participating and non-convertible
d. fluctuating
C. stable Q 38. Preference shares, in case the holders of these have a right
Ans. (a) limited to convert their preference shares into equity shares at their
have:
28. Preference shareholders dividend option according to the terms of issue, such shares are called:
only
right as to
preferential a. Cumulative Preference Shares
a. in the management b. Non-cumulative Preference Shares
b. preferential right of capital at the time of
as to repayment c. Convertible Preference Shares
C. preferential right
the company d. Non-convertible Preference Shares
liquidation of of capital at Ans. (c) Convertible Preference Shares
and repayment
as to dividend
d. preferential right of the company
the time of liquidation or
Capita; Q39. Amount of securities premium can be utilised
for:
as to dividend and repayimEnt
Ans. (d) nreferential right of the company
a. writing-off the preliminary expenses of the company
of liquidation
at the time b. issuing bonus shares to the shareholders of the company
shares:
issue the shares
Q29. A company may C. buy-back of its own
as 5 on application; 7
7 on allotment and? 8 on
These 500 equity shares will be shown as:
final call.
a. Subscribed and fully paid-up Company received the due amount but one
shareholder
b. Subscribed but not fully paid-up holding 250 shares did not pay the allotment money and
C. Issued share capital another shareholder holding 150 shares falled
to pay the
d. None of the above amount due on final call. Total amount of
Ans. (b) Subscribed but not fully paid-up a. 1750 b. 3.200 C. 6,000
calls-in-arrears Is:
d. 4.950
Ans. (d) 7 4.950
Q86. Forfeiture of shares results in the reduction of:
Hint: Calls-in-arrears:
) a. Subscribed Capital b. Authorised Capital
Allotment (250 x 7) = 1750 c. Reserve Capital d. Fixed Assets
Final Call (250 x 8) = 2.000 Ans. (a) Subscribed Capital
(150 x 8) = 1200
Q 87. X Ltd. forfeited 500 shares of 710 each, 7 called up, issued
= 4,950
at a premium of 7 2 per share to be paid at the time of
Q78. If discount on reissue of shares is less than the allotment for non-payment of first call of 2 per share. Entry
amount
forfeited, the surplus is transferred to: on forfeiture will be:
a. Capital Reserve b. General Reserve a. Share Capital A/c Dr. 3,500
Securities Premium Reserve d. Statement of Profit and
c.
1.000
Loss Securities Premium Reserve A/c Dr.
Ans. (a) Capital Reserve To Share First Call A/c 1.000
79. Which of the following is not a capital profit? To Share Forfeiture Ac 3.500
a. Profit prior to
incorporation of the company b. Share Capital A/c Dr. 4.500
b. Profit from the sale of fixed assets Securities Premium Reserve Ac Dr. 1.000
c. Premium on issue of sharees To Share First Call A/c 1,000
d. Compensation received on the termination of a contract To Share Forfeiture A/c 4,500
Ans. (d) Compensation received on the termination of a contract C. Share Capital A/c Dr. 4,500
Q 80. On an equity share of 20, the company called-up 16 but To Share First Call A/c 1,000
To Share Forfeiture A/c 3.500
1 4 has been received by the company, equity share
capital d. Share Capital A/c Dr. 3.500
account will be credited by: To Share First Call A/c 1.000
a. 7 20 b. 16 C.14 d.2 To Share Forfeiture Ac 2.500
Ans. (b) 16 Ans. (d) Share Capital A/c Dr. 3.500
Q 81. Share application account is in the nature of: To Share First Call A/c 1,000
a. Real Account b. Personal Account To Share Forfeiture Ac 2,500
C. Nominal Account d. None of these Q 88. Sun & Moon Ltd. invited applications for 25,000 equity
Ans. (b) Personal Account shares of 10 each and received 30,000 applications along
82. When a company issues shares at,a premium,the amount of with the application money of 4 per share. Which of the
premium should be received by the company: following alternatives can be followed?
a. along with
application money () Refund the excess application money and full allotment to
b. along with allotment money rest of the applicants.
C. along with calls (i) Not to alot any share to some applicants, full allotment to
d. along with any of the above some of the applicants and pro-rata allotment to the rest
of the applicants.
Ans. (d) along with any of the above
(ii) Not to allot any share to some applicants and make pro-
Q 83. Green Ltd. had allotted 10,000 shares to the applicants of rata allotment to other applicants.
14,000 shares on pro-rata basis. The amount payable on; (iv) Make pro-rata allotment to all the applicants and adjust
application is 2 per share. Mohan applied for 420 shares. the excess money received towards call money.
The number of shares allotted to Mohan are: a. Only () b. () and (ii)
a. 60 shares b. 320 shares c. Only (i) d. Al of these
c. 340 shares d. 300 shares Ans. (d) Al of these
Ans. (d) 300 shares 89. Voluntary return of shares for cancellation bythe shareholders
Hint: Number of Shares Allotted = x 10,000 300 is called:
a. Cancellation of shares b. Forfeiture of shares
Q 84. Gopal Ltd. purchased machine of 1,15,000 from Indian c. Surrender of shares d. None of these
Traders, payment ofR 10,000 was made by issuing cheque Ans. (c) Surrender of shares
and the remaining amount by issue of equity shares of the Q90. A company forfeited the following shares:
face value of 10 each fully paid at an issue price of7 10.50 paid-up 7
each. Amount of securities premium will be
200 shares ofR
10 each; called up 9 per:
per share. Journal entry for forfeiture will be:
a. 6.000D b. 7 7.0000 C.F 5.000 d. 4,000 a. Share Capital A/c Dr. 2,000
Ans. (c) 5.000 To Share Forfeiture A/c 200
Hint: Securities Premium = 10,000 x 0.50 = 75.000 To Calls-in-arrears A/C 1.800
b. Share Capital A/c Dr. 2,000
Q85. Mohar Ltd. forfeited 160 shares of 10 each on which the 1.800
To Share Forfeiture A/c
holder had paid only the application money of 2 per share. To Calls-in-arrears AC 200
Out of these, 40 shares were reissued to Gaurav as fully paid C. Share Capital A/c Dr. 1,800
for 9 per share. The gain on reissue is: To Share Forfeiture A/c 1400
a. 320 b. 160 400
To Calls-in-Arrears A/c
C.40 d. None of these d. Share Capital A/c Dr 1,800
Ans. (c) 40 To Share Forfeiture A/c 400
Hint: Gain on Reissue =400 360 =7 40 To Calls-in-Arrears Ac 1,400
Ans. (C) Share Capital A/c Dr. Q 98. Which one of the following
items is not a part of subscribed
1.800
To Share Forfeiture A/c capital?
1,400
To Calls-in-arrears A/c 400 a. Equity Shares
Q91. The amount of discount on reissue of forfeited shares cannot b. Preference Shares
exceed: C. Forfeited Shares
a. 5% of the face value d. Bonus Shares
b. 10% of the face value Ans. (c) Forfeited Shares
c. the amount received on forfeited account is shown in the balance
shares Q99. Balance of share forfeiture
d. the amount not received on forfeited shares sheet under the head.
Ans. () the amount received on forfeited shares a. share capital account
Q92. If the premium on the forfeited shares had already been b. reserve and surplus
received, then securities premium account should be: C.current liabilities and provisions
a. credited d. unsecured loans
b. debited Ans. (a) share capital account
C. no treatment
Q100.At the time of forfeiture of shares,the share capital account is
d. None of the above
debited with:
Ans. (c) no treatment
a. face value b. called up value
93. At the time of reissue of all forfeited shares: C. paid up value d. issued value
a. general reserve is debited with the credit balance left in the
Ans. (b) called up value
forfeited shares account.
b.general reserve is credited with the credit balance left in the
forfeited shares account. Assertion and Reason Type Questions
C. capital reserve is debited with the credit balance left in the
forfeited shares account.
d. capital reserve is credited with the credit balance left in the Directions (Q.Nos. 101-105): Each of the following questions
consists of two statements, one is Assertion (A) and the other is
forfeited shares account.
Ans. (d) capital reserve is credited with the credit balance left in the Reason (R). Give answer:
forfeited shares account. a. Both Assertion (A) and Reason (R) are true and Reason (R) is
Q 94. Discount allowed on re-issue of forfeited shares is debited to: the correct explanation of Assertion (A).
a. Share Capital A/c b. Both Assertion (A) and Reason (R) are true but Reason (R) is
b. Share Forfeiture A/c not the correct explanation of Assertion (A).
C. Statement of Profit & Loss C. Assertion (A) is true but Reason (R) is false.
d. General Reserve A/c d. Assertion (A) is false but Reason (R) is true.
Ans. (6) Share Forfeiture A/c Q 101. Assertion (A): Authorised capital is shown in the notes to
Q95. XY Limited issued 2,50,000 equity shares of 10 each at a accounts on share capital
premium ofT 1 each payable as 2.5 on application, 4 on Reason (R): Authorised capital for equity share capital and
allotment and balance on the first and înal call Applications preference share capital are not shown separately in the
notes to accounts on share capital
were received for
5,00,000equity shares but the company
allotted to them only 2,50,000 shares. Excess money was Ans.
applied towards amount due on allotment. Last call on 500 0102. Assertion (A): Issued share capital can be more than the
shares was not received and shares were forfeited after due authorised share capitalL
notice. This is a case of: Reason (R): Issued share capital is that part of authorised
a. Oversubscription share capital that is used for subscription whether subscribed
b. Pro-rata Allotment or not.
c. Forfeiture of Shares Ans. (d)
d. All of the above Q103. Assertion (A): If a company does not receive the amount
Ans. (d) All of the above called by it on shares, it can forfeit the shares, if authorised
096. If a shareholder does not pay his dues on allotment, for the by its Articles of Association.
amount due, there will be a: Reason (R): Forfeited shares can be reissued by the company
a. credit balance in the shares allotrment account on the terms as decided by it.
b. debit balance in the shares forfeiture account Ans. (b)
C. credit balance in the shares forfeiture account
Q104.Assertion (A): Shares can be issued to employees at a
d. debit balance in the shares allotment account
discount.
Ans. (d) debit balance in the shares allotment account
Reason (R): Shares can be issued to public at a discount.
Q97. The balance of the forfeited shares account after reissue of Ans. (c
forfeited shares is transferred to:
Q 105.Assertion (A): Securities premium reserve is shown in the
a. Statement of Profit & Loss
equity and liabilities part of balance sheet.
b. Share Capital A/c
C. Capital Reserve Ac Reason (R): Securities premium reserve can be used for
d. General Reserve A/c writing-off preliminary expenses.
Ans. (c) Capital Reserve Alc Ans. (b)
Case Based QUESTIONS
Case Study 1
Ans. (a) Underwriters A/c Dr
Read the following hypothetical text and answer the To Share Capital Alc
questions: given
Xen Ltd. Case Study 2
was
incorporated on Ist April, 2019 with registered
ofhceat Delhi. "The capital clause of Memorandum of Read the following hypothetical text and answer the given
Association reflected on Authorised Capital of
25,0,000. questions:
Equity share Capital being 1,50,000 shares of 10 each and Radhe Lid. was incorporated on Ist April, 2020 with a
Preference share capital being 10,000 shares
of 100 each. nominal capital of 7 3,00,000 divided into 6,000 equity
The promoters of the company were shares of7 50 cach. It purchased assets worth 1,00,000
compensated by from M/s Zen Ltd. In consultation with the vendors, it
issuing 1,000 Equity Shares for their efforts in the project
and expenses incurred by them. Besides this, 10,000 issued 2,000 shares as fully paid-up to vendors for purchase
Equity consideration.
Shares were issued to underwriters for their
underwriting Also, the company offered 2,000 shares for public
services.
The company offered to public 1,25,000 Subscription of a premium of 75 per share payable as
Equity Shares
and 5,000, 10% Preference Shares at par for RI5 on application, 715 (including premium) on allotment,
subscription, R10 on first call and 715 on final call. Applications were
amount being payable along with application.
received for 1,950 shares which were duly allotted.
Applications were received for 1,25,000 Equity Shares and
3,500, 10% Preference Shares. Till date final call has not yet been made and all the
shareholders have paid except Raju who did not pay his first
Based on the above information you are required to answer call money on 200 shares. Shares of Raju were forfeited.
the following questions: These shares were reissued @ T35 share paid up.
QL What amount of equity share capital is issued by the Based on the above information you are required to answer
company? the following questions:
a. R12.50.000 b. R14.00.000
QL What amount of shares have been issued to the vendors of
c.13.00,000 d.150,000
building are machinery?
Ans. (b)T14,00.000
a. 3,00,000 b. 1,00.000
Hint: Issued Equity Share Capital
C.2.00.000 d. 4,00.000
= (5.000x1o)+(10.000x10)+(1.25,000x 10) Ans. (b) T1.00,000
50.000+ 1,00.000+12.50.000
=R14,00,000 02. On forfeiture the amount debited to share capital account
will be:
Q2. What amount of preference share capital is issued by the a. 5,000 b. R2,000D
company? c.7,000 d. 4,000
a. 5,00.000 b. 73.50.000 Ans. (c) 7,000
c. 8.50.000 d. 719,00.000 Hint: Amount debited to share capital account
Ans. (a) F5,00.000 will be 7.000 (200 x 35).
Hint: Issued Preference Share Capital Q3. On forfeiture profit on reissue is transferred to:
=
(5.000 x 100) R5.00.000
=
a. general reserve b. capital reserve
Q3. When shares are issued to promoter's
.. account is C. reserve capital d. None of these
debited. Ans. (b) capital reserve
a. incorporation expenses
04. Amount transferred to capital reserve will be:
b. preliminary expenses a. 75,000 b. 7.0000
C. share capital c.R2,000 d. 73,000
d. Either a. or b. Ans. (a) 5,000
Ans. (a) incorporation expenses )
4. What will be the correct journal for issue of shares to Hint: Amount Forfeited Raju's Share (200 x 25)
on 5,000
underwriters? -)Discount on Reissue
a. Underwriters A/c Dr. Capital on Reissue t/f to Capital Reserve 5,000