Accounting for share Capital Test

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Accounting for share Capital Test - 41

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Weekly Quiz Competition

Question 1
1 / -0

Alteration of share capital is effected by a company, if it is authorized by the _______________,

A
Memorandum of Association

B
Articles of Association

C
Shareholders

D
Board of Directors
Question 2
1 / -0

________ refers to that part of the authorized capital which has actually been offered to the public for subscription.

A
Called up capital

B
Subscribed capital

C
Issued Capital

D
Nominal or authorized capital

Solution

Issued share capital is the monetary value of the shares of stock a company actually offers for sale to investors. The number of issued shares generally corresponds to the amount of subscribed share capital, though neither amount can exceed the authorized amount.
Question 3
1 / -0

_________ refers to that part of subscribed capital which has actually been paid by the shareholder to whom shares has been allotted.

A
Paid-up capital

B
Subscribed capital

C
Issued capital

D
Nominal or authorized capital

Solution

Paid-up capital is the amount of money a company has received from shareholders in exchange for shares of stock. Paid-up capital is created when a company sells its shares on the primary market, directly to investors. When shares are bought and sold among investors on the secondary market, no additional paid-up capital is created as proceeds in those transactions go to the selling shareholders, not the issuing company.
Question 4
1 / -0

________will be entitled to receive arrears of their dividend.

A
Cumulative Preference Share

B
Non-Cumulative Preference Share

C
Convertible Debenture

D
All of the above

Solution

A preference share is said to be cumulative when the arrears of dividend are cumulative and such arrears are paid before paying any dividend to equity shareholders including those that were omitted in the past, before the common shareholders are able to receive their dividend payments.
Question 5
1 / -0

The directors of Zenith Ltd. made the final call of Rs.30 per share on May 15,2004, indicating the last date of payment of call money to be May 31, 2004. Mr. B, holding 5,000 shares, paid the call money on July 15, 2004.
If the company adopts Table A, the amount of interest on calls- in- arrear to be paid by Mr. F=?

A
Rs. 625.00

B
Rs. 937.50

C
Rs. 750

D
Rs. 1,125.00
Question 6
1 / -0

Which of the following rights may be given to preference shareholder if provided by Articles?

A
To participate in the surplus profits remaining after payment of equity dividend

B
To receive arrears of dividend at the time of winding up

C
To receive premium on redemption of preference shares

D
All of the above

Solution

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. Capital raised through the issue of redeemable preference shares is to be paid back as premium to such shareholders after the expiry of a stipulated period, whether the company is wound up or not. When company is winding up preference shareholders receive arrears of the dividend.
Question 7
1 / -0

When shares are forfeited, capital account is debited by __________.

A
forfeited amount

B
called up amount on shares

C
normal value of shares

D
paid up amount on shares

Solution

Share Capital Account represents the liability of the company as it is the amount that is borrowed from the public. Therefore, at the time of forfeiture of shares, it is debited with a called-up amount.
Therefore, B is the correct option.
Question 8
1 / -0

Any balance in the capital reduction account after the writing of lost capital is transferred to ________________.

A
Capital reserve account

B
Share surrendered account

C
Capital recognization account

D
Contingency reserve account

Solution

A new account, viz. Capital Reduction Account, is to be opened for transferring the part of capital which is lost, i.e., not represented by assets.
In other words, this account reveals the sacrifices made by various parties, viz. equity shareholders, preference shareholders, debenture-holders, creditors, etc.It is needless to say that this is done by writing-off accumulated losses, intangible assets, over-valuation of assets, etc. At the same time it must be remembered that appreciation of the assets, if any, must be passed through this account (i.e. Re-organisation/Reconstruction Account), that is, this account should be credited.
The balance if any, should be transferred to Capital Reserve Account.
The entry is as:-
Share cap. A/c ………….Dr. xx

To cap reduction A/c………Cr. xx
Question 9
1 / -0

The entry for the above question will be ______________.

A
Share Capital A/c Dr. $70$

To forfeiture A/c $70$

B
Share Capital A/c Dr. $70$

To Share Calls A/c $20$

To Share Forfeiture A/c $50$

C
Share Capital A/c Dr. $100$

To Share Application A/c $Rs. 50$

To Share Allotment A/c $Rs. 20$

To Share Forfeiture A/c $Rs. 30$

D
Share Capital A/c Dr. $100$

To forfeiture A/c $100$
Question 10
1 / -0

Preference shares resemble debentures as they bear ________ rate of return.

A
fixed

B
fluctuating

C
higher

D
lower

Solution

The capital raised by issue of preference shares is called preference share capital.Debentures are an important instrument for raising long term debt capital. Both resembles each other as they bear fixed rate of return on the capital that has been raised.

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Re-Attempt Weekly Quiz Competition

Accounting for share Capital Test - 41

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Accounting for share Capital Test - 41

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SHARING IS CARING

Question 1

Memorandum of Association

Articles of Association

Shareholders

Board of Directors

Question 2

Called up capital

Subscribed capital

Issued Capital

Nominal or authorized capital

Solution

Question 3

Paid-up capital

Subscribed capital

Issued capital

Nominal or authorized capital

Solution

Question 4

Cumulative Preference Share

Non-Cumulative Preference Share

Convertible Debenture

All of the above

Solution

Question 5

Rs. 625.00

Rs. 937.50

Rs. 750

Rs. 1,125.00

Question 6

To participate in the surplus profits remaining after payment of equity dividend

To receive arrears of dividend at the time of winding up

To receive premium on redemption of preference shares

All of the above

Solution

Question 7

forfeited amount

called up amount on shares

normal value of shares

paid up amount on shares

Solution

Question 8

Capital reserve account

Share surrendered account

Capital recognization account

Contingency reserve account

Solution

Question 9

Share Capital A/c Dr. 707070To forfeiture A/c 707070

Share Capital A/c Dr. 707070To Share Calls A/c 202020To Share Forfeiture A/c 505050

Share Capital A/c Dr. 100100100To Share Application A/c Rs.50Rs. 50Rs.50To Share Allotment A/c Rs.20Rs. 20Rs.20To Share Forfeiture A/c Rs.30Rs. 30Rs.30

Share Capital A/c Dr. 100100100To forfeiture A/c 100100100

Question 10

fixed

fluctuating

higher

lower

Solution

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Share Capital A/c Dr. $70$

To forfeiture A/c $70$

Share Capital A/c Dr. $70$

To Share Calls A/c $20$

To Share Forfeiture A/c $50$

Share Capital A/c Dr. $100$

To Share Application A/c $Rs. 50$

To Share Allotment A/c $Rs. 20$

To Share Forfeiture A/c $Rs. 30$

Share Capital A/c Dr. $100$

To forfeiture A/c $100$