Questions for Chapter-Accounting for Share Capital 

MCQ-Based Questions for CUET Accountancy chapter-Accounting for Share Capital 

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Practice Questions for CUET Accountancy chapter-Accounting for Share Capital SET-1

Accounts - MCQ on Accounting for Share Capital

Class XII

Q.1. A company issued 10,000 shares of Rs. 10 each at a discount of 5%. The entire amount is payable on application. The company will receive

a. Rs. 1,00,000.

b. Rs. 95,000.

c. Rs. 50,000.

d. Rs 10,000.

Answer:

(b)

Explanation: Company will receive Rs.9.50 per share on 10,000 shares.

Q.2. Right shares are

a. offered to the promoters.

b. offered in lieu of the dividends.

c. first offered to the employees.

d. offered to the existing shareholders.

Answer:

(d)

Explanation: Right shares are offered to the existing shareholders in proportion to the equity shares held by them.

Q.3. If forfeited shares are reissued at a premium, the amount of such a premium will be credited to the

a. share forfeiture account.

b. securities premium account.

c. capital reserve account.

d. discount on issue of shares account.

Answer:

(b)

Explanation: Premium on re-issue of shares is credited to the securities premium account.

Q.4. The maximum amount beyond which, a company is not allowed to raise funds, by issue of shares, is called

a. issued capital.

b. reserve capital.

c. nominal capital.

d. subscribed capital.

Answer:

(c)

Explanation: The maximum amount beyond which, a company is not allowed to raise funds, by issue of shares, is its nominal or authorised capital.

Q.5. The difference between par value and an issue price below par is called

a. securities premium.

b. discount on issue of shares.

c. calls-in –advance.

d. calls-in –arrear.

Answer:

(b)

Explanation: If, par value is higher then the issue price shares, then it is said to be issued at a discount.

Q.6. As per schedule VI of the Companies Act 1956, forfeited shares account will be

a. added to paid up capital.

b. deducted from paid up capital.

c. shown as a capital reserve.

d. shown under reserves and surpluses.

Answer:

(a)

Explanation: As per schedule VI of the Companies Act 1956, forfeited shares account will be added to the paid up capital.

Q.7. When shares are forfeited, share forfeiture account is credited with

a. called up capital of shares forfeited.

b. calls in arrear of shares forfeited.

c. amount received on shares forfeited.

d. discount allowed.

Answer:

(c)

Explanation: At the time of forfeiture of shares, share forfeiture account is credited with the amount already received on such shares.

Q.8. When shares are forfeited, the share capital account is debited with

a. paid up capital of shares forfeited.

b. called up capital of shares forfeited.

c. amount received on shares forfeited.

d. calls in arrear of shares forfeited.

Answer:

(b)

Explanation: When shares are forfeited, share capital account is debited with called up capital of shares forfeited.

Q.9. A company issued 10,000 shares of Rs. 10 each at a premium of Rs. 2 per share. The company received application for 8,000 shares only. If the entire amount is payable on application, then the money received on application, will be

a. Rs. 20,000.

b. Rs. 80,000.

c. Rs. 96,000.

d. Rs. 1,20,000.

Answer:

(c)

Explanation: The Company will receive Rs. 12 per share on 8,000 shares.

Q.10. The securities premium account can be utilised by the company for

a. writing off any loss on sale of fixed assets.

b. payment of interest on debentures.

c. writing off the expenses.

d. payment of dividend.

Answer:

(c)

Explanation: Securities premium account can be utilised for writing off the expenses/ discount on issue of debentures.

Q.11. Forfeiture of shares mean

a. company issues additional shares.

b. company takes back the shares due to non-payment of call money.

c. shares are not allotted though applied for.

d. company takes back the shares due to wrong behaviour of shareholder.

Answer:

(b)

Explanation: Forfeiture of shares mean the company takes back the shares issued because of non-payment of due money.

Q.12. If, a share of Rs. 10 on which Rs. 8 is called up and Rs. 6 is paid is forfeited, the share capital account will be debited with

a. Rs. 18.

b. Rs. 10.

c. Rs. 8.

d. Rs. 6.

Answer:

(c)

Explanation: Share capital account is debited with the called up capital on the forfeited shares.

Q.13. If, a share of Rs.100 on which, Rs. 60 has been paid is forfeited, the minimum price at which, it can be re-issued is

a. Rs. 100.

b. Rs. 60.

c. Rs. 40.

d. Rs. 10.

Answer:

(c)

Explanation: The maximum discount, which the company can allow, is equal to the forfeited amount on the share. So the company can issue it for Rs. 40 (100-60).

Q.14. Discount on issue of shares account, is shown on the

a. debit side of the profit and loss account.

b. credit side of the profit and loss account.

c. liabilities side of the balance sheet.

d. assets side of the balance sheet.

Answer:

(d)

Explanation: Discount on issue of shares is debited and shown in the assets side of the balance sheet. It is a capital loss.

Q.15. If, a share of Rs.100 issued at a premium of Rs.10 on which, the full amount has been called and Rs. 80 (including premium) paid is forfeited, share forfeiture account should be credited with

a. Rs. 70.

b. Rs. 80.

c. Rs. 90.

d. Rs. 100.

Answer:

(a)

Explanation: Amount already paid is credited to the share forfeiture account. He has paid Rs.80, but it includes Rs. 10 for premium, which will be ignored.

Q.16. Call in advance means

a. the arrears not yet paid.

b. making a call to shareholder that amount is due.

c. amount paid by shareholders not yet called.

d. amount paid by shareholders already called by the company.

Answer:

(c)

Explanation: Call in advance means call paid by shareholder in advance, but yet not called by the company.

Q.17. A company offered 15,000 shares of Rs. 10 each. The company received the application for 17,000 shares. This is an example of

a. minimum Subscription.

b. maximum Subscription.

c. under Subscription.

d. over Subscription.

Answer:

(d)

Explanation: Over subscription of shares means, the company has received more applications than the number of shares offered to the public for subscription.

Q.18. Under subscription of shares means

a. applied shares are more than offered shares.

b. applied shares are equal to offered shares.

c. applied shares are less than offered shares.

d. applied shares are NIL.

Ans. c

Explanation: When the number of shares offered to the public for subscription is more than the number of shares applied for, it is said to be under subscription of shares.

Q.19. A company issued 10,000 shares of Rs. 10 each at a premium of Rs. 2 per share. Applications for 12,000 shares were received. The whole amount is payable on application. The amount received on application will be

a. Rs. 1,00,000.

b. Rs. 1.20,000.

c. Rs. 1,44,000.

d. Rs. 1,54,000.

Answer:

(c)

Explanation: The Company will receive Rs. 12 per share on 12,000 shares.

Q.20. A company issued 10,000 shares of Rs. 10 each at a discount of Rs. 2 per share. Applications for 11,000 shares were received. The whole amount is payable on application. The amount received on application will be

a. Rs. 80,000.

b. Rs. 88,000.

c. Rs. 1,00,000.

d. Rs. 1,10,000.

Answer:

(b)

Explanation: The Company will receive Rs. 8 per share on 11,000 shares.

Practice Questions for CUET Accountancy chapter-Accounting for Share Capital SET-2

Q.21. Minimum number of members required to form a public Limited company is

a. 2.

b. 6.

c. 7.

d. 20.

Answer:

(c)

Explanation: At least 7 members are required to form a public limited company.

Q.22. B Ltd issued shares of Rs. 10 each at a discount of 10%. Mr. C purchased 30 shares and paid Rs. 2 on application but did not pay the allotment money of Rs. 3. If, the company forfeited his entire shares, the forfeiture account will be credited by

a. Rs.90.

b. Rs. 81.

c. Rs. 60.

d. Rs. 54.

Answer:

(c)

Explanation: Share forfeiture account is credited with the amount already received on forfeited shares. He has paid Rs. 2 per share on 30 shares.

Q.23. Arjun Limited is registered with the Nominal Capital of Rs. 5 crore. The Company offered the shares to public for Rs. 3 crore. The Issued capital of Arjun Limited is

a. Rs. 3 crore.

b. Rs. 5 crore.

c. Rs. 8 crore.

d. Rs. 2 crore.

Answer:

(a)

Explanation: It is that part of nominal capital, which is allotted by the company.

Q.24. Subscribed capital is

a. that part of the nominal capital, which is allotted by the company.

b. the another name of Authorised capital.

c. the amount paid on the shares allotted by the company.

d. the capital, which a company can issue in future.

Answer:

(c)

Explanation: Subscribed capital is the amount paid on the shares allotted by the company.

Q.25. Capital reserve implies

a. part of the uncalled capital.

b. capital used at the time of winding up.

c. capital not disclosed in the balance sheet.

d. difference between credit and debit share forfeiture.

Answer:

(d)

Explanation: Capital reserve is a capital profit. The difference between credit share forfeiture and debit share forfeiture is transferred to capital reserve account.

Q.26. Premium on issue of shares can be used for

a. distributing profits.

b. issue of bonus shares.

c. paying the amount to directors.

d. giving bonus to the employees.

Answer:

(b)

Explanation: Premium on issue of shares can be used for issue of bonus shares.

Q.27. Reserve capital is

a. used during the life of the company.

b. used to write of capital losses.

c. disclosed in the balance sheet of the company.

d. created out of uncalled capital.

Answer:

(d)

Explanation: Reserve capital is that part of the uncalled capital, which can be used up except, in the event of and for the purpose of winding up.

Q.28. The main feature of a company is that

a. it has unlimited liability.

b. it depend on members for existence.

c. it has separate legal entity.

d. it does not require registration.

Answer:

(c)

Explanation: A company is an artificial person created by law having separate legal entity.

Q.29. On an equity share of Rs. 100, the company has called up Rs. 80 but the company has received Rs. 70, the share capital account will be credited by

a. Rs. 100.

b. Rs. 80.

c. Rs. 70.

d. Rs. 20.

Answer:

(b)

Explanation: The share capital account is credited by called up amount.

Q.30. On an equity share of Rs. 100, the company has called up Rs. 80 but the company has received Rs. 70, the bank account will be debited by

a. Rs. 100.

b. Rs. 80.

c. Rs. 70.

d. Rs. 20.

Answer:

(c)

Explanation: Bank account is always debited with the amount received on equity shares.

Q.31. “ The relationship between persons, who have agreed to share the profits of a business carried on by all or any of them acting for all” is called

a. private company.

b. public company.

c. joint stock company.

d. partnership.

Answer:

(d)

Explanation: “ The relationship between persons, who have agreed to share the profits of a business carried on by all or any of them acting for all” is called partnership.

Q.32. On a share of Rs. 100 issued at a premium of Rs. 20 on, which Rs. 80 (including premium) have been called up and Rs. 50 (including premium) is forfeited, the share capital account will be debited by

a. Rs. 60.

b. Rs. 70.

c. Rs. 80.

d. Rs. 100.

Answer:

(a)

Explanation: The share capital account will always be debited with called up amount, excluding premium, if any.

Q.33. On a share of Rs. 100 issued at a discount of 10%, Ram has paid Rs. 90. Share capital account will be credited by

a. Rs. 110.

b. Rs. 100.

c. Rs. 90.

d. Rs. 81.

Answer:

(b)

Explanation: In this case the company has called up full amount on each share. Hence share capital will be debited with Rs. 100.

Q.34. X Ltd forfeited 100 shares of Rs. 10 each on, which Rs. 40 per share was paid. The maximum discount the company can offer on re-issue of such shares, is

a. Rs.100.

b. Rs. 60.

c. Rs. 40.

d. Rs. 20.

Answer:

(c)

Explanation: The maximum discount a company can offer is equal to the amount already forfeited on the shares.

Q.35. Shares issued for consideration other than cash means

a. company needs funds.

b. issue of shares to vendors on purchase of fixed assets.

c. issue of shares to selected group of people.

d. right issue.

Answer:

(b)

Explanation: Shares are issued for consideration other than cash when company purchases fixed assets.

Q.36. Section dealing with the use of security premium amount is

a. 78.

b. 79.

c. 178.

d. 179.

Answer:

(a)

Explanation: Under section 78 the company can use security premium only for the stated purposes.

Q.37. Private placement of shares means:

a. they are issued to the employees of the company for providing technical know-how.

b. they are made at pre-determined price to the pre determined people having strategic stake in the company.

c. allotment made to the selected group of persons privately.

d. it is a scheme under, which the company grants option to an employee to apply for the shares.

Answer:

(c)

Explanation: Allotment made to the selected group of persons privately and not to public in general through public issue is called private placement of shares.

Q.38. The main feature of a public company is, that

a. it restricts right to transfer its shares.

b. it limits the number of members to 50.

c. it prevents the public to subscribe for the shares.

d. it is not a private company.

Answer:

(d)

Explanation: Public company is a company, which is (a) not a private company (b) it does not limit the members to 50, (c) it also does not restrict the right to transfer shares and (d) does not prevents the public to subscribe for the shares.

Q.39. When we use the word ‘Company’ in ordinary sense, it refers to

a. private company.

b. limited company.

c. unlimited company.

d. company limited by guarantee.

Answer:

(b)

Explanation: When we use the word ‘Company’, it refers to limited company.

Q.40. A company issued 50,000 shares of Rs. 100 each. Applications received were for 1,00,000 shares and company allotted pro rata to all the applicants. Mohan was allotted 2,000 shares. The shares applied by Mohan will be

a. 1,000 shares.

b. 2,000 shares.

c. 4,000 shares.

d. 1,00,000 shares.

Answer:

(c)

Explanation: He must have applied for more shares. The ratio of applied and allotted is 2:1.

Practice Questions for CUET Accountancy chapter-Accounting for Share Capital SET-3

Q.41. X Ltd. purchased land for Rs. 55, 000 from A bros. It issued equity shares of Rs. 100 each at a premium of 10%. Number of equity shares issued to A bros. are

a. 50.

b. 500.

c. 550.

d. 5500.

Answer:

(b)

Explanation: Number of equity shares issued to A bros. are 55,000/110.

Q.42. ESOS means

a. shares issued to the employees of the company for providing technical know-how.

b. allotment made to the people having strategic stake in the company.

c. allotment made to the selected group of persons privately.

d. the company grants option to an employee to apply for the shares of company at a pre determined price.

Answer:

(d)

Explanation: It is a scheme under, which the company grants option to an employee to apply for the shares of company at a pre-determined price.

Q.43. A company issued 1,00,000 shares of Rs. 10 each, payable Rs. 5 on application. Applications received were for 1,50,000 shares and pro-rata allotment was made to 1,25,000 shares. Excess application money was applied towards sum due on allotment. Calculate the amount refunded to the shareholders.

a. Rs. 5,00,000

b. Rs. 2,50,000

c. Rs. 1,25,000

d. Rs. 25,000

Answer:

(d)

Explanation: The amount to be refunded to shareholders shall be 25,000 shares @ Rs. 5 per share.

Q.44. A company issued 10,000 shares of Rs. 10 each. Applications received were for 9,800 shares. Rs. 2 per share were payable on application. The amount received on application will be

a. Rs. 9, 800.

b. Rs. 19,600.

c. Rs. 20,000.

d. Rs. 1,00,000.

Answer:

(b)

Explanation: Rs 2 per share is received on 9,800 shares.

Q.45. A company issued 10,000 shares of Rs. 10 each at a discount of 10%. Applications received were for 9,800 shares. The whole amount is payable on application. The amount received on application will be

a. Rs. 88,200.

b. Rs. 90,000.

c. Rs. 90,200.

d. Rs. 1,00,000.

Answer:

(a)

Explanation: Rs. 9 per share will be received on 9,800 shares.

Q.46. Credit balance is always shown by

a. share application account.

b. share allotment account.

c. share capital account.

d. share first and final call account.

Answer:

(c)

Explanation: Credit balance is always shown by share capital account.

Q.47. If, an applicant pays full amount on application, his days for the purpose of interest on calls in advance will be calculated

a. from the date he has given the advance.

b. from the date of allotment of shares.

c. from the date of previous call.

d. as per the articles of the company.

Answer:

(b)

Explanation: Calls in advance is assumed to be received from the date of allotment of shares, if it is received with application.

Q.48. Discount on issue of shares account is credited,

a. when allotment is made due on such shares.

b. when allotment is received on such shares.

c. at the time of reissue of shares originally issued at a discount.

d. at the time of forfeiture of shares originally issued at a discount.

Answer:

(d)

Explanation: Discount on issue of shares account is credited at the time of forfeiture of shares originally issued at a discount.

Q.49. Bharat Ltd. invited applications for 2,00,000 shares of Rs. 10 each. Applications received were for 3,00,000 shares. Neena was allotted 3,000 shares. The number of shares applied by Neena will be

a. 2,000.

b. 3,000.

c. 4,500.

d. 5,400.

Answer:

(c)

Explanation: Shares applied must be more than the shares allotted. It will be calculated as follows 3000 x 3/2.

Q.50. Securities premium account is debited

a. at the time of making it due.

b. at the time of receiving it.

c. at the time of forfeiture, when the amount is not received.

d. at the time of re-issue of shares at a premium.

Answer:

(c)

Explanation: Securities premium account is debited at the time of forfeiture, when the amount is not received.

Q.51. H Ltd. issued 20,000 shares of Rs. 10 each payable Rs. 2 on application and Rs. 5 on allotment. Applications received were for 24,000 shares and pro-rata allotment was made to all the applicants. Money over paid on application will be utilised for sum due on allotment. Ramesh to whom 400 shares were allotted failed to pay allotment and his shares were forfeited immediately. The amount of share forfeiture account will be

a. Rs. 800.

b. Rs. 960.

c. Rs. 1,600.

d. Rs. 1,920.

Answer:

(b)

Explanation: Ramesh has applied for 480 shares. Hence the amount paid by him will be Rs. 480 x 2 = Rs, 960.

Q.52. Ram has paid only application money of Rs. 10 (including premium of Rs. 5). At the time of forfeiture of shares, the amount of share forfeiture account will be

a. Rs. 5.

b. Rs. 10.

c. Rs. 15.

d. Rs.100.

Answer:

(a)

Explanation: Share forfeiture account is credited with the amount already received on such shares. In this case Ram has paid Rs. 10, but Rs. 5 is premium, which will be ignored.

Q.53. A company is unable to buy back its shares out of

a. free reserves.

b. the securities premium account.

c. the proceed of any shares or other specified securities.

d. fresh issue of shares.

Answer:

(d)

Explanation: A company cannot buy back its shares out of fresh issue of shares.

Q.54. A contract or bond deposited with the third person is

a. escrow account.

b. buy back of shares.

c. bank account.

d. ESPS.

Answer:

(a)

Explanation: A contract or bond deposited with the third person is escrow account. It is a bond deposited with the third person, by whom, it is delivered to the guarantor on the fulfillment of the condition.

Q.55. Pro-rata allotment of shares takes place

a. in case of minimum subscription.

b. in case of maximum subscription.

c. in case of over subscription.

d. in case of under subscription.

Answer:

(c)

Explanation: Pro-rata allotment is done, when there is over subscription of shares.

Q.56. A company is unable to utilise securities premium for

a. issuing full paid bonus shares to the members.

b. for distribution of dividends and interests.

c. writing off preliminary expenses of the company.

d. purchasing its own shares.

Answer:

(b)

Explanation: A company cannot use the securities premium amount for distributing dividends and paying interest.

Q.57. Preference shares mean that

a. they are the real owners of the company.

b. rate of dividend is not fixed.

c. they are creditors of the company.

d. dividend is paid before it is paid on equity shares.

Answer:

(d)

Explanation: Dividend is paid on preference shares before it is paid on equity shares.

Q.58. If the question does not specify when the premium is to be received, it should be received along with

a. application.

b. allotment.

c. first call.

d. second and final call.

Answer:

(b)

Explanation: It is assumed, to be taken with allotment.

Q.59. A company issued 1,00,000 share of Rs. 100 each at a discount of Rs. 6 per share, which is payable as Rs. 30 on application, Rs. 40 on allotment and Rs. 24 on first and final call. Discount account is debited

a. at the time of application.

b. at the time of allotment.

c. at the time of first and final call.

d. on the basis of the mood of the accountant.

Answer:

(b)

Explanation: In the absence of any instructions, it is debited at the time of allotment.

Q.60. The example of current liability is

a. calls in advance.

b. calls in arrear.

c. cash at bank.

d. securities premium.

Answer:

(a)

Explanation: Calls in advance is a example of current liability.

Q.61. The advantage of Public limited company over Private limited company is that

a. its shares are not easily transferable.

b. it can issue shares to family members only.

c. it can issue the shares to general public.

d. its formation is very complex.

Answer:

(c)

Explanation: The Company can allot shares only up to the number of shares issued to the public.

Q.62. A company issued 10,000 shares of Rs. 100 each. Applications received were for 15,000 shares at the rate of Rs. 6 per share. The company made pro rata allotment to 12,000 shares. The amount that will be refunded back to the shareholders will be

a. Rs. 12,000.

b. Rs. 15,000.

c. Rs. 18,000.

d. Rs. 30,000.

Answer:

(c)

Explanation: Application for 3,000 shares is rejected at the rate of Rs. 6 per share. This amount will be refunded back.

Q.63. The real owners of a Public Limited Company are

a. preference Shares.

b. debentures.

c. convertible shares.

d. ordinary shares.

Answer:

(d)

Explanation: Equity shareholders are the owners of the Company. They have the voting rights.

Q.64. The Minimum Paid up capital in case of a Public Company is

a. Rs. 1, 00,000.

b. Rs. 5, 00,000.

c. Rs. 10, 00,000.

d. Rs. 50, 00,000.

Answer:

(b)

Explanation: As per companies act Rs. 5, 00,000 is the amount of minimum paid up capital in case of a public company.

Q. 65. A company forfeited 1,000 shares of Rs. 10 each at a premium of Rs. 2 each fully called Rs. 5 (including premium) has been paid, the amount shown under the ‘Calls un paid Account’ will be

(a) Rs. 3, 000.

(b) Rs. 5, 000.

(c) Rs. 7, 000.

(d) Rs. 9, 000.

Answer:

(c)

Explanation: The price of a share is Rs. 12 (including premium) and Rs. 5 (including premium) has been paid. The amount left unpaid per share is Rs. 7.

Q.66. The discount allowed at the time of re-issue of forfeited shares is debited to

a. general reserve account.

b. capital reserve account.

c. discount account.

d. share forfeiture account.

Answer:

(d)

Explanation: The discount allowed at the time of re-issue of forfeited shares is debited to the share forfeiture account.

Q.67. Minimum number of members required to form a private company is

a. 2.

b. 6.

c. 7.

d. 20.

Answer:

(a)

Explanation: At least 2 members are required to form a private limited company.

Q.68. Authorised capital is also known, as

a. issued capital.

b. nominal capital.

c. paid-up capital.

d. subscribed capital.

Answer:

(b)

Explanation: Authorised capital is also known, as Nominal capital. It is the maximum amount of share capital, which a company can raise.

Q.69. Issue of shares at a discount is dealt under

a. Section 78.

b. Section 79.

c. Section 178.

d. Section 179.

Answer:

(b)

Explanation: Section 79 deals with the restrictions on the issue of shares at a discount.

Q.70. Y Ltd. purchased land for Rs. 90,000 from B Ltd. It issued equity shares of Rs. 50 each at a discount of 10%. The number of equity shares issued to B Ltd. would be

a. 81,000 shares.

b. 8,100 shares.

c. 2,000 shares.

d. 1,800 shares.

Answer:

(c)

Explanation: The number of equity shares issued to B Ltd. would be 90,000/45 = 2000 shares.

Q.71. Shares can be forfeited

a. for non-payment of call money.

b. for failure to attend meeting.

c. for failure to repay loan to the bank.

d. for issue of shares as a collateral security.

Answer:

(a)

Explanation: Shares can be forfeited for non-payment of allotment or call money.