ACCOUNTING FOR COMPANIES : ISSUE OF SHARES

1. The portion of the capital which can be called only at the time of winding up of the company is known as ............

(a) Nominal capital (b) Uncalled up capital

Ans: (c) Reserve capital

2. The minimum time interval between two consecutive calls of a share according to Table ‘F’ of Companies Act 2013 is

(a) 14 days (b) One month

Ans: (b) One month

3. Discount allowed on the reissue of forfeited shares can not exceed

(a) 10% of the paid up capital

(b) 10% of the capital reissued

(d) The amount not received on forfeited shares

Ans: (c) The amount received for forfeited shares

4. Hindustan Tyres Ltd. issued 10,000 equity shares of ₹ 10 each. Amount payable as ₹ 2 on application, ₹ 3 on allotment, ₹ 3 on first call and ₹ 2 on second and final call. Applications were received for 12,000 shares. Allotment was made to all applicants on pro-rata basis. Vikram an allotee of 200 shares could not pay allotment and first call money and his shares were forfeited after first call. Find out the amount due from Vikram, which was not received on account of allotment and first call.

(a) ₹ 1,200 (b) ₹ 1,600

Ans: (c) ₹ 1,120

5. What name is given to the method of issue of shares when shares are allotted to promoters, friends, relatives, NRI’s, Mutual Funds, Financial Institutions etc.

(a) Personal Placement (b) Secret Placement

Ans: (d) Private Placement

6. Dividend is usually paid upon:

(a) Paid up share capital (b) Issued capital

Ans: (a) Paid up share capital

7.. X limited forfeited 100 shares of ₹ 10 each for nonpayment of first call of ₹ 3 and second and final call of ₹ 2. Later on these shares were reissued @ ₹ 8 as fully paid up. The accounting treatment of the above will be:

(a) Amount transferred to Capital Reserve ₹ 100

(b Amount transferred to Capital Reserve ₹ 200

(d) Amount transferred to Capital Reserve ₹ 400.

Ans: (c) Amount transferred to Capital Reserve ₹ 300.

8. Mr. X holder of 10,000 shares of ₹ 10 each fully called up payable as ₹ 3 on Application: ₹ 3 on allotment and ₹ 2 premium: ₹ 2 on first call and balance on final call. He couldn’t pay first call subsequently his shares were forfeited after first call. Share capital will be debited by:

(a) ₹ 1,00,000 (b) ₹ 1,20,000

Ans: (c) ₹ 80,000

9. Sunrise Ltd. issued 10,000 equity shares of ₹ 10 each payable as On application ₹ 2 On allotment ₹ 3 On first Call ₹ 2 On final call ₹ 3. Mr. Kunal holding 200 shares failed to pay allotment money whereas Mr. Yuvraj holding 300 shares paid both calls along with allotment. The net amount received on allotment will be:

(a) ₹ 29,400 (b) ₹ 31,500

Ans: (c) ₹ 30,900

10. A company issued 5,000 shares of ₹ 10 each at 20% premium payable as follows: Application: ₹ 2, allotment: ₹ 5 (including premium) and First and Final call: ₹ 5. A holder of 200 shares failed to pay the first and final call. His shares were forfeited.

Calculate the amount to be credited to shares forfeiture account.

(a) ₹ 1,000 (b) ₹ 1,400

Ans: (a) ₹ 1,000

11. When interest on Calls in arrears becomes due, the following account will be debited by a company.

(a) Interest on calls in arrears account

(b) Sundry Shareholders account

(d) Calls in arrears account

Ans: (b) Sundry Shareholders account

12. X limited forfeited 200 equity shares of ₹ 100 each, issued at 10% premium for non-payment of allotment money of ₹ 40 per share (including premium) and first and final call of ₹ 30 per share. Out of the forfeited shares, 100 shares are reissued for ₹ 9,100. The amount debited to shares forfeited account at the time of reissue will be:

(a) ₹ 700 Will be debited to share forfeited A/c

(b) ₹ 900 will be debited to share forfeited A/c

(d) ₹ 1,900 will be debited to share forfeited A/c

Ans: (b) ₹ 900 will be debited to share forfeited A/c

13.. Happy limited invited applications for 20,000 shares of ₹ 10 each, payable as ₹ 3 on application, ₹ 4 on allotment and balance on final call. Applications received for 30,000 shares. The company made pro-rata allotment among the applicants of 25,000 shares and applicants for 5,000 shares are sent letter of regret. Mr. Vijay who applied for 1,250 shares was allotted 1,000 shares. He failed to pay allotment and call money. The net amount received on allotment will be:

(a) ₹ 80,000 (b) ₹ 79,000

Ans: (d) ₹ 61,750

14. . Which value reflected at the time of over subscription of shares, when a company made pro-rata allotment to all the applicants.

(a) Honesty (b) Integrity

Ans: (c) Equity

15. When shares are forfeited, the share capital account is debited with the:

(a) Nominal value of shares (b) Called-up value of shares.

Ans: (b) Called-up value of shares

16. Charvi Ltd. was registered with an authorised capital of ₹ 1,00,00,000 divided into 1,00,000 equity shares of ₹ 100 each. The company offered for public subscription 60,000 equity shares. Applications for 56,000 shares were received and allotment was made to all the applicants. All calls were made and duly received except the second and final call of ₹ 20 per share on 500 shares. Compute the amount of subscribed share capital?

(a) ₹ 56,00,000 (b) ₹ 56,000

Ans: (d) ₹ 55,90,000

17. When a Public limited company proposes to increase its subscribed capital, it is required to offer the shares to promoters, venture capitalists, financial institutions etc. at a pre decided price. Such an issue is termed as:

(a)Preferential Allotment (b) Private Placement of Shares

Ans: (a) Preferential Allotment

18. Share application account is a:

(a) Personal Account (b) Real Account

Ans: (a) Personal Account

19. At the time of forfeiture of shares, by what amount is the share capital account debited?

(a) Nominal Value (b) Paid up value

Ans: (d) Called up value

20. If vendors are issued fully paid up shares of ₹ 80,000 in consideration of net assets of ₹ 60,000 then the balance of ₹ 20,000 will be

(a) Debited to statement of Profit and Loss

(b) Debited to goodwill account

(d) Credited to capital reserve account

Ans: (b) Debited to statement of Profit and Loss

21. A Company forfeited 1,300 shares of ₹ 100 each, ₹ 75 called up, for non- payment of ₹ 40 per share. What will be the minimum price at which these shares can be reissued as fully paid up?

(a) ₹ 70 per share (b) ₹ 65 per share

Ans: (b) ₹ 65 per share

22. A company forfeited 800 shares of ₹ 50 each, which were issued at 30% premium, for non payment of final call of ₹ 25 per share (including premium ₹ 5). 80% of the forfeited shares were reissued at ₹ 60 per share as fully paid up. The amount to be credited to capital reserve A/c will be:

(a) ₹ 12,800 (b) ₹ 24,000

Ans: (c) ₹ 19,200

23. Share forfeited account appears in the Balance Sheet of a company with an amount:

(a) Not received on forfeited shares

(b) Received on forfeited and reissued shares

(d) Received on forfeited and not yet reissued shares.

Ans: (d) Received on forfeited and not yet reissued shares.

24. Various terms relating to share capital of a company are:

(i) Issued Capital;

(ii) Authorized capital;

(iii) Subscribed but not fully paid up

(iv) Subscribed and fully paid up.

Identify from following the proper order in which they appear in notes to company’s balance sheet:

(a) (i), (ii), (iii), (iv) (b) (ii), (i), (iv), (iii)

Ans: (b) (ii), (i), (iv), (iii)

25. The minimum paid-up capital for a Private limited Company is ............

(a) 1 lakh (b) 2 lakh

Ans: (a) 1 lakh

26. As per SEBI Guidelines the minimum subscription amount has been fixed at

(a) 90% of Authorised share Capital

(b) 90% of Subscribed Capital

(d) 90% of Uncalled Capital

Ans: (c) 90% of Issued Share Capital

27. A company issued 10,000 shares against 14,000 applied by the public. Mr. A got 300 shares on pro-rata basis. Application and allotment money were ₹ 2 and ₹ 3 per share respectively. Mr. A failed to pay allotment money. The amount of application money received and allotment money not received respectively from A will be

(a) ₹ 840 and ₹ 760 (b) ₹ 660 and ₹ 840

Ans: (c) ₹ 840 and ₹ 660

28. Dragon limited forfeited 500 shares of ₹ 20 each issued at 5% premium, for non- payment of first and final call of ₹ 9 and ₹ 5 respectively. Amount credited to share forfeiture A/c will be

(a) ₹ 3,000 (b) ₹ 3,500

Ans: (a) ₹ 3,000

29. 600 shares allotted to Mr. X, on which ₹ 100 each called up, and ₹ 50 paid up were forfeited and reissued for ₹ 70 each as ₹ 100 paid up. Amount transferred to capital reserve A/c is

(a) ₹ 12,000 (b) ₹ 15,000

Ans: (a) ₹ 12,000

30. . JD Ltd. acquired assets worth ₹ 8,10,000 from TPT Ltd. by issue of shares of ₹ 100 each at par. The number of shares issued by JD Ltd. to settle the purchase consideration and amount credited to share capital will be:

(a) 8,100 shares; ₹ 8,10,000 (b) 7,500 shares; ₹ 7,50,000

Ans: (a) 8,100 shares; ₹ 8,10,000

31. Balaji Ltd. issued 25,000 equity shares of ₹ 10 each payable as ₹ 2 on application, ₹ 3 on allotment, ₹ 2 on first call and the balance in the final call. Yuvraj who has 1,000 shares paid full value of shares with allotment money. The amount to be debited to bank account at the time of receipt of first call money will be.

(a) ₹ 50,000 (b) ₹ 47,000

Ans: (d) ₹ 48,000

32. Excess of purchase consideration over net assets is debited to:

(a) General Reserve (b) Capital Reserve

Ans: (d) Goodwill

33. A Company forfeited 3,000 shares of ₹ 10 each (₹ 7 called up) for non- payment of call money of ₹ 2 per share. Out of these 2,000 shares were re- issued at ₹ 8 per share and remaining shares were re-issued at ₹ 12 per share as fully paid up. What amount will be transferred to Capital Reserve?

(a) ₹ 17,000 (b) ₹ 13,000

Ans: (c) ₹ 11,000

34. Under Companies Act, 2013, which section gives the purpose for which Securities Premium money can be utilized by the company?

(a) Section 78 (b) Section 53

Ans: (d) Section 52

35. The shares issued under Employees stock option plan are issued at:

(a) Lower than market price (b) Higher than market price

Ans: (a) Lower than market price

36. BATMAN Ltd. was registered with an authorized capital of ₹ 25,00,000 divided into shares of ₹ 10 each. The company invited applications for 1,20,000 shares issued at ₹ 2 premium. All the money has been duly received except final call of ₹ 3 per share on 6,000 shares. The company forfeited 4,000 shares and re-issued 3,000 shares at ₹ 8 per share as fully paid up.

Calculate the balance of Share forfeited to be shown in the books of the company.

(a) ₹ 15,000 (b) ₹ 7,000

Ans: (b) ₹ 7,000

37. The excess of Net Assets over purchase consideration will be:

(b) Credited to General Reserve

(d) Credited to Securities Premium Reserve

Ans: (c) Credited to Capital Reserve

38. A Company forfeited 5,000 shares of ₹ 10 each (₹ 7 called up) for non- payment of ₹ 3 per share. Out of these 3,000 shares were re-issued at ₹ 12 per share as fully paid up. What amount will be transferred to Capital Reserve?

(a) ₹ 26,000 (b) ₹ 20,000

Ans: (c) ₹ 12,000

39. Out of the following, for what purpose Securities Premium Reserve balance cannot be utilised as per Section 52 of Companies Act, 2013?

(a) To write off Preliminary Expenses

(b) To provide for premium payable of redemption of Preference Shares or Debentures

(d) Both (a) and (b)

Ans: (c) To write off Loss on sale of Fixed Asset, if any.

40. The directors of a company forfeited 1,000 shares of ₹ 10 each, ₹ 7.50 called up, for non-payment of first call money of ₹ 2.50 per share. 700 of these shares are reissued @ ₹ 7 per share as fully paid up. What will be the balance of Share Forfeited Account to be shown in the Balance Sheet?

(a) ₹ 5,000 (b) ₹ 1,500

Ans: (b) ₹ 1,500

41. Vendors are issued fully paid shares of ₹ 1,00,000 in consideration of net assets of ₹ 1,20,000, the balance of ₹ 20,000 will be (i) to (ii):

(a) (i) Debited (ii) Goodwill A/c

(b) (i) Debited (ii) Capital Reserve A/c

(d) (i) Credited (ii) General Reserve A/c

Ans: (c) (i) Credited (ii) Capital Reserve A/c

42. Calls in arrear will appear in the Balance Sheet if:

(a) All the forfeited shares are not reissued.

(b) All the defaulter shares are not forfeited.

(d) Shares are forfeited and all shares are not re-issued

Ans: (b) All the defaulter shares are not forfeited.

43. A Company invited applications for 80,000 shares of ₹ 10 each issued at ₹ 2 premium. All the money has been duly received except final call of ₹ 3 per share on 5,000 shares. These shares were forfeited and out of these 3,000 shares were re-issued @ ₹ 8 per share as fully paid up. At what amount, Share Capital will appear in the Balance Sheet of the Company?

(a) ₹ 7,80,000 (b) ₹ 8,00,000

Ans; (d) ₹ 7,94,000

44. . A shareholder applied for 2,000 shares and was allotted 1,000 shares only. He has paid ₹ 2 on application but his shares were forfeited for non-payment of allotment money of ₹ 3 per share (including ₹ 2 premium). Amount to be credited to Share Forfeiture A/c on account of forfeiture of shares will be:

(a) ₹ 4,000 (b) ₹ 2,000

Ans: (c) ₹ 3,000

45. XYZ Ltd forfeited 20 shares of ₹ 100 each (₹ 60 called up) issued at par to Kunal on which he had paid ₹ 20 per share. Out of these 15 shares were reissued to Ram credited as ₹ 60 paid up for ₹ 45 per share. Amount transferred to capital reserve will be

(a) ₹ 300 (b) ₹ 75

Ans: (b) ₹ 75

46. When shares are issued to promoters for services offered by them, which A/c will be debited?

(a) Preliminary exp. (b) Miscellaneous exp.

Ans: (c) Goodwill

47. As per section 52 of Companies Act 2013, accounts to be credited against securities premium are all except?

(a) Preliminary Expenses

(b) Premium on redemption of Debentures

(d) Interest on Debentures

Ans: (d) Interest on Debentures

48. A company forfeited 4,000 shares of ₹ 10 each on which only Application money of ₹ 3 has been paid. Out of these 2,000 shares were re-issued and ₹ 4,000 has been transferred to Capital Reserve. Calculate the rate at which these shares were re-issued, if shares were reissned as fully paid.

(a) ₹ 10 per share (b) ₹ 9 per share

Ans: (b) ₹ 9 per share

49. Pick the odd one out for the purpose of utilisation of Securities Premium Reserve.

(a) Distribution as Dividend

(b) Buy Back of Equity Shares

(d) Providing for premium payable on redemption of Debentures

Ans: (a) Distribution as Dividend

50. ABC Ltd. forfeited 2,000 shares of ₹ 10 each, held by Geeta, who had applied for 3,000 shares and paid application money of ₹ 4 (including ₹ 1 premium) and failed to pay allotment money of ₹ 5 (including ₹ 1 premium) and ₹ 3 on call. Out of these 1,200 shares were re-issued to Babita at a discount of

₹ 2 per share. How much amount will be transferred to Capital Reserve?

(a) ₹ 2,400 (b) ₹ 9,600

Ans: (d) ₹ 3,600