Accounting for share Capital Test

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Accounting for share Capital Test - 63

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Weekly Quiz Competition

Question 1
1 / -0

Shobhana Ltd. forfeited $$30$$ shares of $$Rs.10$$ each fully called up for non-payment of allotment money of $$Rs.3$$ per share and call money of $$Rs.4$$ per share. These shares are re-issued for $$Rs.8$$ per share fully paid. What is the amount to be transferred to Capital Reserve Account?

A
$$Rs.300$$

B
$$Rs.60$$

C
$$Rs.30$$

D
$$Rs.90$$

Solution

A) Entry for Share Forfeiture:
Share Capital A/c [30 X 10]....Rs.300
To Share Forfeiture A/c [30 X 3]....Rs.90
To Calls-in-Arrear A/c [30 X 7]........Rs.210

(B) Entry for Re-issue of Shares:
Bank A/c [30 X 8]....Rs.240
Share Forfeiture A/c [30 X 2]....Rs.60
To Share Capital A/c [30 X 10]....Rs.300

(C) Entry for transfer to Capital Reserve Account:
Share Forfeiture A/c...Rs.30
To Capital reserve Account A/c....Rs.30 (90-60)
Question 2
1 / -0

If a share of Rs. 10 on which Rs. 8 is called -up and Rs. 6 paid is forfeited, the Share Capital Account will be debited with _________.

A
Rs. 10

B
Rs. 8

C
Rs. 6

D
Rs. 4

Solution

Shares are issued at a face value against which a certain amount is called up. The called up amount is credited to share capital account.

Once the shares are forfeited, a reversal entry need to be passed in books of account by debiting the share capital account by the amount of called up amount.
Question 3
1 / -0

When shares are forfeited all entries relating to the forfeited shares, except those relating to premium, already recorded in the accounting records, must be ______.

A
Same

B
Reversed

C
Different

D
All of the above

Solution

Some shareholders fail to pay one or more installments, i.e, allotment money and/or call money. In such case, the company can forfeit their shares, i.e. cancel their allotment already received thereon as forfeited to the company within the framework of the provisions in its articles. When shares are forfeited all entries relating to the forfeited shares, except those relating to premium, already recorded in the accounting records, must be reversed.
Question 4
1 / -0

Which of the following statement is correct:

A
Dividend is to be paid within $$30$$ days of declaration

B
Shareholders may declare a dividend smaller than recommended by board.

C
They cannot declare a larger dividend or any dividend where none has been recommended

D
All of the above

Solution

A dividend declared must be paid off in 30 days to the shareholders. Any amount of unpaid dividend need to be transferred to a separate account.
A company's article of association typically provides that directors of the company may recommend the amount of dividend to be given to the shareholders out of available distributable profits subject to approval by the shareholders.
The Shareholders may approve the recommendation of directors by passing a written resolution or at general meeting. They may decide to declare a lower rate of dividend as proposed by the board but can not approve the higher amount.
Question 5
1 / -0

Bonus shares can be issued if the __________.

A
Article of association permit it

B
Proposal is approved by the shareholders in the general meeting

C
Issue is made out of free reserves

D
All of the above

Solution

As per Section 63 of The Companies Act, 2013:-
A) A company may issue fully paid-up bonus shares to its members in any manner.
Whatsoever out of:
1) its free reserves;
2) the securities premium account; or
3)the capital redemption reserve account:
B) No company shall capitalize its profits or reserves for the purpose of issuing fully paid-up bonus shares unless—
1) it is authorized by its articles;
2) it has, on the recommendation of the Board, been authorized in the general
meeting of the company.
Question 6
1 / -0

When any shareholder fails to pay the amount due on allotment or on any of the calls, such amount is known as ________.

A
Calls-in-Arrears

B
Share Capital

C
Share Application

D
Share Allotment

Solution

It often happens that shareholders do not pay the call amount when it becomes due. When any shareholder fails to pay the amount due on allotment or on any of the calls, such amount is known as 'Calls-in- Arrears'/'Unpaid Calls'. Calls-in-Arrears represent the debit balance of all the calls account and are shown as a deduction from the paid-up capital on liabilities side of the balance sheet.
Question 7
1 / -0

The following journal entry is recorded for the amount of calls received in advance ______________________.

A
Bank A/c Dr.
To Calls-in-Advance A/c

B
Calls-in-Advance Dr.
To Bank A/c

C
Interest on Calls-in-Advance A/c Dr.
To Calls-in-Advance A/c

D
Bank A/c Dr.
To Interest on Calls-in-Advance A/c

Solution

Sometimes some shareholders pay a part or whole of the amount of the calls not yet made. The amount so received from the shareholders is known as "Calls in Advance". The amount received in advance is a liability of the company and should be credited to 'Call-in Advance Account'. The amount received will be adjusted towards the payment of calls as and when they become due. Table A of the companies act provides for the payment of interest on calls in advance at a rate not exceeding 6% per annum.
The following journal entry is recorded for the amount of calls received in advance:
Bank A/c Dr.
To Calls-in-Advance A/c
Question 8
1 / -0

The main objectives of the company are stated in __________.

A
articles of association

B
memorandum of association

C
certificate of incorporation

D
companies act
Question 9
1 / -0

If the amount of minimum subscription is not received to the extent of _______, the issue disslove.

A
85%

B
90%

C
95%

D
80%

Solution

It is possible for the shares of some companies to be oversubscribed which means that applications for more shares are received than the number offered for subscription through the prospectus. Under such a condition, the alternatives available to the directors are as follows:
(i) They can accept some applications in full and totally reject the others,
(ii) A pro-rata distribution can be made by them,
(iii) A combination of the above two alternatives can be adopted by them.
If the amount of minimum subscription is not received to the extent of 90%, the issue devolves. In case the applications received are less than the number of shares offered to the public, the issue is termed as 'under subscribed'.
Question 10
1 / -0

Shares can be converted into stock when _________.

A
authorized by central government

B
fully paid

C
fully paid and authorized by articles of association

D
(a) and (c) are satisfied

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Accounting for share Capital Test - 63

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Accounting for share Capital Test - 63

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Question 1

$$Rs.300$$

$$Rs.60$$

$$Rs.30$$

$$Rs.90$$

Solution

Question 2

Rs. 10

Rs. 8

Rs. 6

Rs. 4

Solution

Question 3

Same

Reversed

Different

All of the above

Solution

Question 4

Dividend is to be paid within $$30$$ days of declaration

Shareholders may declare a dividend smaller than recommended by board.

They cannot declare a larger dividend or any dividend where none has been recommended

All of the above

Solution

Question 5

Article of association permit it

Proposal is approved by the shareholders in the general meeting

Issue is made out of free reserves

All of the above

Solution

Question 6

Calls-in-Arrears

Share Capital

Share Application

Share Allotment

Solution

Question 7

Bank A/c Dr. To Calls-in-Advance A/c

Calls-in-Advance Dr. To Bank A/c

Interest on Calls-in-Advance A/c Dr. To Calls-in-Advance A/c

Bank A/c Dr. To Interest on Calls-in-Advance A/c

Solution

Question 8

articles of association

memorandum of association

certificate of incorporation

companies act

Question 9

85%

90%

95%

80%

Solution

Question 10

authorized by central government

fully paid

fully paid and authorized by articles of association

(a) and (c) are satisfied

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Bank A/c Dr.
To Calls-in-Advance A/c

Calls-in-Advance Dr.
To Bank A/c

Interest on Calls-in-Advance A/c Dr.
To Calls-in-Advance A/c

Bank A/c Dr.
To Interest on Calls-in-Advance A/c