Accounting for share Capital Test

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Accounting for share Capital Test - 37

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Weekly Quiz Competition

Question 1
1 / -0

The voluntary return of shares for cancellation by shareholders is called ___________.

A
surrender of shares

B
forfeiture of shares

C
transfer of shares

D
transmission of shares

Solution

When a shareholder feels that he cannot pay further calls, he may himself surrender the shares to the company. These shares are then cancelled. Surrender of shares is a voluntary return of shares for the purposes of cancellation.
Question 2
1 / -0

Which of the following statements is not true with regard to issue of shares by a joint stock company?

A
Shares can be issued for consideration other than cash.

B
In the event of over-subscription, the company cannot allot more number of shares than those specified in the prospectus.

C
As per the SEBI guidelines, the minimum subscription clause is applicable only to the first issue of shares by the company.

D
The share application money is converted into share capital even before the board of directors approve the allotment of shares.

Solution

Share application money pending allotment is an amount received on share application against which no allotment has been made yet. Companies are required to allot shares within 60 days from the date of receipt of application money. In case if money is not refunded the amount shall be treated as “Deposits”.
Question 3
1 / -0

The following information pertains to X Ltd: The amount of dividend payable will be ___________.
Equity share capital called up Rs. $$5,00,000$$
Calls in arrear Rs. $$40,000$$
Calls in advance Rs. $$25,000$$
Proposed dividend $$15\%$$

A
Rs. $$75,000$$

B
Rs. $$72,750$$

C
Rs. $$71,250$$

D
Rs. $$69,000$$

Solution

Equity sharew capital called up - Calls in arrear
5,00,000 - 40,000 = 4,60,000
4,60,000 x 15% = 69,000.
Question 4
1 / -0

Share Application and Allotment A/c are ___________.

A
Personal A/c

B
Real A/c

C
Nominal A/c

D
Addition to Capital A/c

Solution

Share Application or Share Allotment or Share Capital A/c all are personal accounts as they represent money from the shareholders and when money is due, these are to be debited because of the rule "Debit the receiver".
Question 5
1 / -0

At the time of forfeiture of shares which were originally issued at a discount, the accounting entry will be
I. A Debit Share capital account with the called-up value of shares forfeited.
II. A Credit Share forfeiture account with the amount received on forfeited shares.
III. A Credit Discount on issue of shares with the amount of discount allowed on forfeited shares,
IV. A Credit Calls-in-arrears with the amount due but not paid on forfeited shares.

A
Both (I) and (IV)

B
Both (IV) and (III)

C
Both (I) and (II)

D
(I), (II), (III), and (IV)

Solution

When Forfeiture of shares Issued at Par In this case, The company debits the Share Capital Account with the amount called-up up to the date of forfeiture on shares.
It credits the Shares Allotment Amount or Shares Call Account with amount called-up on forfeited shares but due from the shareholders.
Question 6
1 / -0

The subscribed share capital of S Ltd. is Rs. $$80,00,000$$ of Rs. $$100$$ each. There were no calls in arrear till the final call was made. The final call made was paid no $$77,500$$ shares. The calls in arrear amounted to Rs. $$62,500$$. The final call on share will be _____________.

A
Rs. $$25$$

B
Rs. $$7.80$$

C
Rs. $$20$$

D
Rs. $$62.50$$

Solution

Total no of shares : 80,00,000/100 = 80,000/-
Final calls received on no. of shares : 77,500/-
No. of Shares on which call money not received = 80000-77500 = 2500/-
Amount of calls in arrears Rs. 62500/-
Call Money = 62500/2500 = 25/-.
Question 7
1 / -0

A company invited applications for certain number of equity shares and received applications for more number of shares along with the applications money. Which of the following alternative can be followed?
I. Refund the excess applications.
II. Make pro-rata allotment to all the applicants, and no refund of excess application money.
III. Not to allot any shares to some applicants, full allotment to some of the applications and pro-rata allotment to the rest of the applicants.
IV. Not to allot any shares to some applicants and make pro-rata allotment to other applicants.

A
Only (II)

B
Both (I) and (II)

C
All of these

D
Both (II) and (IV)

Solution

When a company receives applications for shares more than the number of shares it has offered to the public, it is known as over-subscription of shares. Usually, the companies with strong financial background or good reputation in the market or profitable future prospects receive over-subscription of shares.
Question 8
1 / -0

Which of the following is not correct?

A
Nominal capital is the maximum amount that a company is authorised to issue to the public without altering the memorandum of association.

B
Subscribed capital is that part of nominal capital that is offered to the public for subscription.

C
Subscribed capital will be equal to the issued capital, when all the shares offered to the public are taken up by the public.

D
Called up capital is that part of the subscribed capital that has been called up.
Question 9
1 / -0

Which of the following statements is true regarding calls-in-arrears?

A
Calls-in-arrears is that part of called up capital which remains unpaid.

B
It is not shown in the balance sheet until the defaulted shares are forfeited.

C
The rate of interest on calls-in-arrear is chargeable at $$10$$% p.a., if a company adopts Table A.

D
Charging of interest on calls-in-arrears need not be permitted by the Articles of Association.
Question 10
1 / -0

If the forfeited shares are issued at a premium, the amount of the premium shall be credited to ___________.

A
Share Capital A/c

B
Capital Reserve A/c

C
Share Forfeiture A/c

D
Security Premium A/c

Solution

The premium amount is credited to the Securities Premium Account. The accounting treatment for reissue of forfeited shares at a premium:
Bank A/c Dr.
To Share Capital A/c
To Securities Premium Reserve A/c

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Equity share capital called up	Rs. $$5,00,000$$
Calls in arrear	Rs. $$40,000$$
Calls in advance	Rs. $$25,000$$
Proposed dividend	$$15\%$$

Accounting for share Capital Test - 37

Result

Accounting for share Capital Test - 37

Score

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Rank

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SHARING IS CARING

Question 1

surrender of shares

forfeiture of shares

transfer of shares

transmission of shares

Solution

Question 2

Shares can be issued for consideration other than cash.

In the event of over-subscription, the company cannot allot more number of shares than those specified in the prospectus.

As per the SEBI guidelines, the minimum subscription clause is applicable only to the first issue of shares by the company.

The share application money is converted into share capital even before the board of directors approve the allotment of shares.

Solution

Question 3

Rs. $$75,000$$

Rs. $$72,750$$

Rs. $$71,250$$

Rs. $$69,000$$

Solution

Question 4

Personal A/c

Real A/c

Nominal A/c

Addition to Capital A/c

Solution

Question 5

Both (I) and (IV)

Both (IV) and (III)

Both (I) and (II)

(I), (II), (III), and (IV)

Solution

Question 6

Rs. $$25$$

Rs. $$7.80$$

Rs. $$20$$

Rs. $$62.50$$

Solution

Question 7

Only (II)

Both (I) and (II)

All of these

Both (II) and (IV)

Solution

Question 8

Nominal capital is the maximum amount that a company is authorised to issue to the public without altering the memorandum of association.

Subscribed capital is that part of nominal capital that is offered to the public for subscription.

Subscribed capital will be equal to the issued capital, when all the shares offered to the public are taken up by the public.

Called up capital is that part of the subscribed capital that has been called up.

Question 9

Calls-in-arrears is that part of called up capital which remains unpaid.

It is not shown in the balance sheet until the defaulted shares are forfeited.

The rate of interest on calls-in-arrear is chargeable at $$10$$% p.a., if a company adopts Table A.

Charging of interest on calls-in-arrears need not be permitted by the Articles of Association.

Question 10

Share Capital A/c

Capital Reserve A/c

Share Forfeiture A/c

Security Premium A/c

Solution

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