Corporate

Accounting
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MCQ
Question Bank
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Reconstruction of
Companies
1.If there is any balance in the capital reduction account after
writing off all the accumulated losses then the same is
transferred to ;

(A) Share Capital Account

(B) Capital Reserve Account
(C) General Reserve Account
(D) None of these

Answer : (B) Capital Reserve Account

2. A company has issued capital of 10,000 equity shares of Rs.
10 each fully paid. It decides to cover its capital into 20,000
equity shares of Rs. 5 each. It is a case of

(A) Consolidation of Share Capital

(B) Sub-division of share capital
(C) Decrease in unissued share capital
(D) None of the Above

Answer : (B) Sub-division of share capital

3. If the creditors are willing to reduce their claims against the
company, then the amount of reduction in their claim will be
transferred to :

(A) Share capital Account

(B) Creditors Account
(C) Capital Reduction Account
(D) None of these

Answer : (C) Capital Reduction Account

4. In case of subdivision of share capital the total number
of shares ______

A. Increases
B. Decreases
C. Does not change
D. None of Above

Answer : (A) Increases

5. If the shares of smaller denominations are converted into the
shares of higher denominations without changing the total
amount of share capital, then it is a case of :

A. Consolidation of share Capital

B. Sub-division of share capital
C. Decrease in unissued share capital
D. None of these

Answer : (A) Consolidation of share Capital

6. When a company converts its equity shares into capital
stock, then the account to be credited is ;

A. Equity share capital A/c

B. Equity Capital Stock A/c
C. No Entry is required
D. None of these

Answer : (B) Equity Capital Stock A/c

7. A. Ltd with a share capital of 10,000 equity shares of Rs.
10 each fully paid decides to repay Rs. 5 per share thus making
each share of Rs. 5 fully paid. It is a case of

A. Reducing share capital by returning the excess

capital
B. Reducing the liability on account of uncalled
capital
C. Reducing the paid up capital
D. All of above

Answer : (A) Reducing share capital by returning the excess

capital
8. For writing off the accumulated losses under the scheme
of capital reduction, we debit :

A. Share Capital A/c

B. Accumulated losses A/c
C. Capital Reduction Account
D. None of these

Answer : (C) Capital Reduction Account

9. Any loss on revaluation of the assets at the time of
internal reconstruction, will be charged from :

A. Revaluation A/c
B. Share Capital A/c
C. Capital reduction A/c
D. None of these

Answer : (C) Capital reduction A/c

10. In which of the following cases, procedure of reduction
of capital is not called for :

A. Redemption of preference shares

B. Forfeiture of shares
C. Surrender of shares or gift of shares
D. All of the above

Answer : (D) All of the above

11. In a scheme of reorganisation amount of shares
surrendered by shareholders is transferred to :

A. Capital Reduction A/c

B. Shares Surrendered A/c
C. Capital reserve A/c
D. Reserve capital A/c

Answer : (B) Shares Surrendered A/c

12. Amount sacrificed by shareholders is credited to :

A. Capital reduction A/c

B. Shares surrendered A/c
C. Capital reserve A/c
D. Reserve Capital A/c

Answer : (A) Capital reduction A/c

13. To carry out capital reduction, permission is required
from :

A. The Competent Court

B. Company Law Board
C. Central Government
D. SEBI

Answer : (A) The Competent Court

14. When company is turn into liquidation and new company is
formed to take over business &such company it is termed
as ..........

A) Absorption
b) Liquidation
c) External Reconstruction
d) Internal Reconstruction

Answer : (C) External Reconstruction

15. When company is internally re-organised without
liquidation it is termed as.................

a) Amalgamation
b) Absorption
c) External Reconstruction
d). Internal Reconstruction

Answer : (D) Internal Reconstruction

16. In case of Internal Reconstruction following account is
prepared to ascertain the result of scheme .............

a) Realisation A/c
b) Capital Reduction A/c
c) Profit & Loss A/c
d) None

Answer : (B) Capital Reduction A/c

17. Balance of shares surrendered but not re-issued
transferred to ...............

a) Profit & Loss A/c

b) Realisation A/c
c) Capital Reduction A/c
d) None

Answer : (C) Capital Reduction A/c

18. In case of Internal Reconstruction payment of
contingent liability is debited to .............

a) Profit & Loss A/c

b) Capital Reduction A/c
c) Realisation A/c
d) Other

Answer : (B) Capital Reduction A/c

19. Realisation of unrecorded asset under Internal
Reconstruction is credited to ..............

a) Capital Reserve A/c

b) Profit & Loss A/c
c) Realisation A/c
d) Capital Reduction A/c

Answer : (D) Capital Reduction A/c

20. Increase in value assets under Internal Reconstruction
is credited to …………..

a) Profit & Loss A/c

b) Capital Reduction A/c
c) Realisation A/c
d) Other

Answer : (B) Capital Reduction A/c

21. Decrease in Value assets under Internal Reconstruction
is debited to ..............

a) Capital Reserve A/c

b) Profit & Loss A/c
c) Realisation A/c
d) Capital Reduction A/c

Answer : (D) Capital Reduction A/c

22. Increase in Value liability under Internal Reconstruction
is debited to …………..

a) Profit & Loss A/c

b) Goodwill A/c
c) Capital Reduction A/c
d) None

Answer : (C) Capital Reduction A/c

24. Decrease in value liability under Internal
Reconstruction is credited to ..............

a) Profit & Loss A/c

b) Capital Reduction A/c
c) Realisation A/c
d) Capital Reserve A/c

Answer : (B) Capital Reduction A/c

25.Reserve for doubtful debt on debtors under internal
Reconstruction is debited to ....................

a) Profit & Loss A/c

b) Goodwill A/c
c) Capital Reduction A/c
d) None

Answer : (C) Capital Reduction A/c

26. Authorized capital is also termed as ..................

a) Nominal Capital
b) Reserve Capital
c) Sink Capital
d) None

Answer : (A) Nominal Capital

27. The part of share capital, which is reserved and cannot
called during life time of company is termed as...........

a) Authorized Capital
b) Subscription Capital
c) Called-up Capital
d) Reserve Capital

Answer : (D) Reserve Capital

28. In………., an existing company’s financial structure is
reorganized without liquidating the existing company and
forming a new company.

A. Amalgamation
B. External reconstruction
C. Absorption
D. Internal reconstruction

Answer : (D) Internal reconstruction

28. .Internal reconstruction is done due to ………..

A. Accumulated losses
B. Shortage of working capital
C. Large amount of fictitious assets
D. All of these

Answer : (D) All of these

29. In ………., the company does not loss its identity

A. Amalgamation
B. External reconstruction
C. Absorption
D. Internal reconstruction

Answer : (D) Internal reconstruction

30. Internal reconstruction can be ………

A. Alteration of share capital

B. Reduction of share capital
C. Re-organization of capital
D. All of these

Answer : (D) All of these

31. Capital of a company can be reduced by …………

A. Authorization of Articles
B. Passing of a special resolution
C. Confirmation of court
D. All of these

Answer : (D) All of these

32. Capital Reduction Account is a ………..

A. Nominal Account
B. Permanent Account
C. Temporary Account
D. None of these

Answer : (C) Temporary Account

33. The balance in Capital Reduction Account is
transferred to …………

A. General Reserve
B. Profit and loss Account
C. Capital Reserve
D. Goodwill Account

Answer : (C) Capital Reserve

34. In internal reconstruction, the existing company will be
……….

A. Amalgamated
B. Absorbed
C. Liquidated
D. None of these

Answer : (D) None of these

Thank You