Accounting for share Capital Test

Result

Accounting for share Capital Test - 18

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Weekly Quiz Competition

Question 1
1 / -0

__________is the account created in connection with internal reconstruction.

A
Realization a/c

B
Capital reduction a/c

C
Adjustment a/c

D
CRR a/c

Solution

The Capital Reduction Account is a temporary account opened in order to carry out the internal reconstruction. When the scheme is carried out, the account is closed. The Capital Reduction Account represents the sacrifice made by the Shareholders, Debenture-holders, Creditors etc.
Question 2
1 / -0

Capital reduction account is used to _________.

A
Write of losses

B
Transfer of capital

C
Issue bonus shares

D
None of these

Solution

Capital Reduction/Reconstruction Account is used for reducing share capital, paying/waiving off liabilities or revaluation of assets in order to write off unnecessary items such as P/L (Dr), Goodwill, Fictitious assets etc.
Question 3
1 / -0

Alteration of shares of smaller amounts into shares of larger amount is called _________ of share capital.

A
surrender

B
subdivision

C
consolidation

D
None of these

Solution

Share consolidation is a corporate action conducted by the company with the intention to reduce its number of shares trading on the stock exchange. It does so by reducing the number of shares held by its existing shareholders.
Question 4
1 / -0

Under net payment method, purchase consideration includes all payments made to the shareholders in the form of _________.

A
Equity share

B
Preference share

C
Cash

D
All of these

Solution

'Purchase Consideration' under this method is taken as the aggregate of all payments made in the form of shares, debentures, other securities and cash to the shareholders of the transferor company.
Question 5
1 / -0

Amount sacrificed by the shareholders is called ______.

A
Capital reserve

B
General reserve

C
Capital reduction

D
None of these

Solution

The Capital Reduction Account represents the sacrifice made by the Shareholders, Debenture-holders, Creditors, etc. The appreciation in the value of assets is credited to this account. It is also available to write off accumulated losses, intangible assets, over-valuation of assets, etc.
Question 6
1 / -0

Which of the following fictitious assets is not taken over by the transferee company?

A
Preliminary expenses

B
Underwriting commision

C
Discount on issue of shares

D
All of these

Solution

During Amalgamation , Realization Account is opened and all the assets except any fictitious assets like preliminary expenses, underwriting commission, discount on issue of shares or debentures, profit and loss account (Dr.) balance, etc., are transferred to it at their book value.
Question 7
1 / -0

While preparing the transferee company's financial statement under amalgamation in the nature of merger, the assets and liabilities taken over from the transferor company should be incorporated at _____.

A
Cost

B
Book value

C
Revised value

D
None of these

Solution

In case of other assets, the fair value may be determined by reference to the market value of the assets given up. Where the market value of the assets given up cannot be reliably assessed, such assets may be valued at their respective net book values.
Question 8
1 / -0

The amount of surrendered shares is credited to ________.

A
CRR

B
Sinking fund

C
Capital reduction account

D
Reserve

Solution

The Capital Reduction Account is a temporary account opened in order to carry out the internal reconstruction. When the scheme is carried out, the account is closed. The Capital Reduction Account represents the sacrifice made by the Shareholders, Debenture-holders, Creditors etc.
Question 9
1 / -0

Which of the following result in reduction of capital?

A
Reducing share capital

B
Reducing the amount payable to creditors

C
Appreciation in the value of assets

D
All of these
Question 10
1 / -0

Which of the following does not involve liquidation of any company?

A
Internal reconstruction

B
Amalgamation

C
Absorption

D
External reconstruction

Solution

Internal reconstruction refers to the method of corporate restructuring wherein existing company is not liquidated to form a new one. External reconstruction is one in which the company undergoing reconstruction is liquidated to take over the business of existing company. New company. No new company is formed.

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Re-Attempt Weekly Quiz Competition

Accounting for share Capital Test - 18

Result

Accounting for share Capital Test - 18

Score

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Rank

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SHARING IS CARING

Question 1

Realization a/c

Capital reduction a/c

Adjustment a/c

CRR a/c

Solution

Question 2

Write of losses

Transfer of capital

Issue bonus shares

None of these

Solution

Question 3

surrender

subdivision

consolidation

None of these

Solution

Question 4

Equity share

Preference share

Cash

All of these

Solution

Question 5

Capital reserve

General reserve

Capital reduction

None of these

Solution

The Capital Reduction Account represents the sacrifice made by the Shareholders, Debenture-holders, Creditors, etc. The appreciation in the value of assets is credited to this account. It is also available to write off accumulated losses, intangible assets, over-valuation of assets, etc.

Question 6

Preliminary expenses

Underwriting commision

Discount on issue of shares

All of these

Solution

Question 7

Cost

Book value

Revised value

None of these

Solution

Question 8

CRR

Sinking fund

Capital reduction account

Reserve

Solution

Question 9

Reducing share capital

Reducing the amount payable to creditors

Appreciation in the value of assets

All of these

Question 10

Internal reconstruction

Amalgamation

Absorption

External reconstruction

Solution

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