Question by CA (Dr.) G.S.GREWAL, Series – 28

True / False

  1. Equity shareholders are the owners of the company.

Fill in the Blank

  1. The % associated with preference shares as prefix (e.g., 10% Preference Share)s is the rate of ________.

Multiple Choice Question

  1. Which of the following capitals is shown in the company’s Balance Sheet:-

(a) Authorised Capital

(b) Issued Capital

(c) Subscribed and Fully Paid Up

(d) Reserve capital

Answer Series – 28

  1. True

Reason: Equity shareholders are the holders of the company as they have voting rights in all the circumstances.

  1. Dividend
  1. (c)

Reason: In the Company’s Balance Sheet, only Subscribed and Fully paid up share Capital Amount is shown. Authorised Capital and Issued Capital are shown in Notes to Accounts and Reserve Capital is not shown in the Company’s Balance Sheet and Note to Accounts.

Question Series – 29

  1. Subscribed capital can be more than issued capital.
  1. When the called up amount is not paid by the shareholder then it may be transferred to ____ account.
  1. When the shares are issued for consideration other than cash which account will be credited:-

(a) Securities Premium Account

(b) Capital Reserve Account

(c) Vendor’s Account

(d) Share Capital Account

Answer Series – 29

  1. False

Reason: Subscribed Capital is a part of Issued Capital which the company has issued for cash or for consideration other than cash. It includes shares issued for subscription and subscribed, shares subscribed by signatories to the Memorandum of Association, shares subscribed by the directors as qualifying shares and shares allotted for consideration other than cash. Hence we can say that it cannot be more than issued capital.

  1. Calls-in-Arrears
  1. (d)

Reason: If shares are issued to Vendor then following entry is passed:-

Vendor’s A/c                          …Dr.   (With the nominal value of shares allotted)

To Share Capital A/c

Hence it is clear that Share Capital Account will be credited since the allotted share amount transfer to Share Capital Account.

Question – Series 57

  1. Gain on forfeited shares that have been reissued is transferred to Capital Reserve.
  2. When the shares are issued at a price more that face value it is shares issued at _______.
  3. X Ltd. forfeited 2,000 shares of ₹ 10 each (which were issued at par) held by Naresh for non-payment of allotment money of ₹ 4 per share. The called-up value per share was ₹ 9. On forfeiture, the amount debited to Share Capital Account will be

(a)     ₹ 10,000

(b)     ₹ 8,000

(c)     ₹ 2,000

(d)     ₹ 18,000

Answer – Series 57

  1. True

Reason: If forfeited shares are reissued at par or premium the total amount forfeited on forfeited shares is a gain of capital nature hence, transferred to Capital Reserve Account.

  1. Premium
  2. (d)

Reason: –

Share Capital A/c           …Dr.           18,000

To Forfeited Shares A/c                        10,000

To Calls-in-Arrears A/c                            8,000

Question – Series 78

  1. Balance in the Forfeited Shares Account is shown in the Balance Sheet under the head Unsecured Loans.
  2. Application money should be refunded, if _______ is not received.
  3. If a share of ₹ 10 issued at a premium of ₹ 2 on which the full amount has been called and ₹  8 (including premium) paid is forfeited, the Share Capital Account should be debited with

(a)     ₹  12

(b)     ₹  10

(c)     ₹  8

(d)     ₹  6

Answer – Series 78

  1. False

Reason:  Balance in the forfeited Shares Account is shown in the Balance Sheet under the head share capital. After reissue of all the forfeited shares, balance left in forfeited Share Account is transferred to Capital Reserve Account.

  1. Minimum Subscription
  2. (b)

Reason: The Journal Entry is

Share Capital A/c                            …Dr.  10

To Forfeited Shares A/c                                     6

To Calls-in-Arrears A/c                                      4

Question – Series 79

  1. A Company can issue shares at discount to public.
  2. When the shares are issued at a price more than face value it is known as ________.
  3. The part of Authorised Capital which can be called-up only on winding up is called

(a)     Issued Capital

(b)     Unsubscribed Capital

(c)     Reserve Capital

(d)     Nominal Capital

Answer – Series 79

  1. False

Reason:  A company can issue shares at par and at premium but cannot issue shares at discount.

  1. Premium
  2. (c)

Reason: Reserve Capital is that part of uncalled capital which the company resolves to call at the time of winding up of the company.

Question – Series 91

  1. Calls-in-Arrears is the amount not received by the company against the amount called towards share capital.
  2. SEBI prescribes that application money should not be less than _______ of the issued price.
  3. Reserve Capital is a part of

(a)     Issued Capital

(b)     Authorised Capital

(c)     Subscribed Capital

(d)     Called-up Capital

Answer – Series 91

  1. True

Reason: The amount which is not received by the company against called up share capital by the shareholder is Calls-in-Arrears.

  1. 25%
  2. (c)

Reason: Reserve Capital is a Capital which is called in the event of winding up of the company on the subscribed shares. Such shares are shown as ‘Subscribed but not fully paid-up’.

Question – Series 114

  1. The part of Authorised Capital which can be called-up only on winding up is called issued capital.
  2. X Ltd. purchased business of Y Ltd. by paying ₹ 13 Lakh for the Assets of ₹ 18 Lakh and Liabilities of ₹4 Lakh. ___________A/c will be credited by ₹ 1 Lakh.
  3. When shares are forfeited, Share Capital Accounted is debited with

(a)     Nominal Capital.

(b)     Called-Up value of shares.

(c)      Paid-Up value of shares.

(d)     Market value of shares.

Answer – Series 114

  1. False

Reason: Reserve Capital is part of uncalled capital which the company resolves to call at the time of winding up of the company.

  1. Capital Reserve
  2. (b)

Reason: When shares are forfeited, Share Capital Account is debited with the called-up up to the date of forfeiture on share forfeited because it was credited with the amount called up as share capital.