Accounting for share Capital Test

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Accounting for share Capital Test - 15

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Weekly Quiz Competition

Question 1
1 / -0

The capitals of X, Y and Z are Rs. 1,00,000; Rs. 75,000 and Rs. 50,000; profits are shared jn the ratio of 3 : 2 : 1. Y retires on the basis of firm purchased by other partners. The new ratio between X and Z is 3 :1. Find the capital of X and Z.

A
Rs. 1,50,000 and Rs. 1,00,000

B
Rs. 1,46,250 and Rs. 42,000

C
Rs. 1,56,250 and Rs.68,750

D
Rs. 86,250 and Rs. 46,250
Question 2
1 / -0

A and B enter into a Joint Venture sharing profits and losses in the ratio 3 : 2. A purchased good costing 2,00,000. Other expenses of A 10,000. B sold the goods for 1,80,000. Remaining goods were taken over by B at 20,000. The amount of final remittance to be paid by B to A will be:

A
2,15,000

B
2,05,000

C
2,10,000

D
None of these
Question 3
1 / -0

Which of the following can be treated as type of shares?

A
Equity shares

B
Preference share

C
Both (A) & (B)

D
None of the above
Solution
- Equity shares are the main source of finance of a firm. It is issued to the general public. Equity shareholders do not enjoy any preferential rights with regard to repayment of capital and dividend. They are entitled to residual income of the company, but they enjoy the right to control the affairs of the business and all the shareholders collectively are the owners of the company.
- Preference shares, more commonly referred to as preferred stock, are shares of a company's stock with dividends that are paid out to shareholders before common stock dividends are issued. If the company enters bankruptcy, the shareholders with preferred stock are entitled to be paid from company assets first.
Question 4
1 / -0

There are 20,000 Preference Shares of Rs 10, on which only Rs 8 has been called up. Company wants to redeem these shares. Company has received different advices. Which of the following advices is correct?

A
Company cannot redeem preference shares

B
Can redeem preference shares

C
Company should make the final call @ Rs 2 and make shares fully paid up, and then preference shares may be redeemed.

D
None of these
Question 5
1 / -0

Closing Capitals of Ram, Shyam and Mohan was 50,000; 45,000 and 30,000 respectively. Their drawings during the year were 10,000, 5,000 and 12,000 respectively. Amount of net profit earned during the year was 18,000 which was distributed in the ration of 3 :2 : 1. Opening capital of Mohan will be:

A
44,000

B
56,000

C
39,000

D
45,000
Question 6
1 / -0

The minimum amount that should be called by a company with application for its shares is the following per cent of face value of shares.

A
2%

B
5%

C
10%

D
15%
Question 7
1 / -0

Equity shareholders are____.

A
Entitled to dividend at a fixed rate

B
Not entitled to dividend at a fixed rate

C
Entitled to dividend prior to payment of dividend to preference shareholder

D
All of the above

Solution

Equity shares will get dividend and repayment of capital after meeting the claims of preference shareholders. There will be no fixed rate of dividend to be paid to the equity shareholders and this rate may vary from year to year. This rate of dividend is determined by directors and in case of larger profits, it may even be more than the rate attached to preference shares. Such shareholders may go without any dividend if no profit is made.
Question 8
1 / -0

According to Section 78 of the Companies Act, the amount in the Securities Premium A/c cannot be used for the purpose of _________________.

A
Issue of fully paid bonus shares

B
Writing off losses of the company

C
Writing off preliminary expenses

D
Writing off commission or discount on issue of shares

Solution

As per section 52 of the companies act, 2013,Security premium may be used by the company :
1.To issue fully paid up bonus shares.
2.To write off preliminary expenses.
3.To write off commission, discount or expenses on issue of securities of the company.
4.To provide for the premium payable on the redemption of debentures or preference share capital.
5.On the purchase of own shares.
Therefore, B is the correct option.
Question 9
1 / -0

Which of the following is not true?

A
Loss on reissue of shares cannot be more than the gain on forfeiture of those shares.

B
Where all the forfeited shares are not reissued the share forfeited account will show as credit balance equal to gain on forfeiture of shares not yet issued.

C
When the shares are forfeited, securities premium is debited along with share capital where premium has not been received.

D
Where forfeited shares are issued at premium, the amount of such premium is credited to capital reserve account.

Solution

The options A, B and C are the correct statements whereas the option D is not true.
The option A is true because SEBI guidelines prove that loss incurred on reissue of shares cannot be more than the gain received on forfeiture of shares. This is because more of loss will occur to the firm if it continues to reissue at loss even when gain on forfeiture is less than the loss on reissue of each share.
The option B is also true because when a company doesn't reissue all the forfeited shares, there arises a gain on forfeiture as company has received more on cancellation of shares compared to reissue of shares. And that gain would be credited to the forfeiture account.
The option C is amongst the true statement as the company hasn't received premium on the canceled shares, so it will debit the security premium along with share capital on forfeiture of shares as the company wants that premium to be paid.
The option D is not true among the all because the premium on forfeited shares is a part of share capital and hence has to be credited to share capital account.
Question 10
1 / -0

Shares of a company can't be issued at ______________.

A
Premium

B
Discount

C
Par

D
Any of these

Solution

As per the rules of SEBI a company cannot issue shares on $$discount$$ value. It may violate the rules of SEBI and the Section 53 of the Companies Act 2013.
A company cannot issue shares at a discount because the loss due to the discounted price is barely managed by any company. Moreover, it leads to the rising in unhealthy competition, companies which have been low graded may provide a discount to investors but at the same time, they fool them with their invaluable working. Thus, to protect the interest of investors, company act 2013 has prohibited the issue of shares at a discounted rate.

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Accounting for share Capital Test - 15

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Accounting for share Capital Test - 15

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Question 1

Rs. 1,50,000 and Rs. 1,00,000

Rs. 1,46,250 and Rs. 42,000

Rs. 1,56,250 and Rs.68,750

Rs. 86,250 and Rs. 46,250

Question 2

2,15,000

2,05,000

2,10,000

None of these

Question 3

Equity shares

Preference share

Both (A) & (B)

None of the above

Solution

Question 4

Company cannot redeem preference shares

Can redeem preference shares

Company should make the final call @ Rs 2 and make shares fully paid up, and then preference shares may be redeemed.

None of these

Question 5

44,000

56,000

39,000

45,000

Question 6

2%

5%

10%

15%

Question 7

Entitled to dividend at a fixed rate

Not entitled to dividend at a fixed rate

Entitled to dividend prior to payment of dividend to preference shareholder

All of the above

Solution

Question 8

Issue of fully paid bonus shares

Writing off losses of the company

Writing off preliminary expenses

Writing off commission or discount on issue of shares

Solution

Question 9

Loss on reissue of shares cannot be more than the gain on forfeiture of those shares.

Where all the forfeited shares are not reissued the share forfeited account will show as credit balance equal to gain on forfeiture of shares not yet issued.

When the shares are forfeited, securities premium is debited along with share capital where premium has not been received.

Where forfeited shares are issued at premium, the amount of such premium is credited to capital reserve account.

Solution

Question 10

Premium

Discount

Par

Any of these

Solution

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