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Accounting for share Capital Test - 64

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Accounting for share Capital Test - 64
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  • Question 1
    1 / -0
    _________ is a situation where number of shares applied are less than the number for which applications have been invited for subscription.
    Solution
    Under subscription is a situation where number of shares applied for is less than the number for which applications have been invited for subscription. For example, a company offered 2,00,000 shares for subscription to the public but the applications were received for 1,90,000 shares only. In such a situation, the allotment will be confirmed to 1,90,000 shares and entries shall be made accordingly. 
  • Question 2
    1 / -0
    If shares are issued at premium, i.e. at an amount more than the nominal or par value of shares, the amount of premium is credited to a separate account called ________.
    Solution
    It is quite common for the shares of financially strong and well-managed companies to be issued at a premium, i.e. at an amount more than the nominal or par value of shares. Thus, when a share of the nominal value of Rs. 100 is issued at Rs. 105, it is said to have been issued at a premium of 5 percent. When the issue of shares is at a premium, the amount of premium may technically be called at any stage of the issue of shares. However, premium is generally called with the amount due on allotment, sometimes with the application money and rarely with the call money. The premium amount is credited to a separate account called 'Securities Premium Account'.
  • Question 3
    1 / -0
    A company offered  2,00,000 shares for subscription to the public, but the applications were received for 1,90,000 shares only. The allotment will be confirmed to _________ shares.
    Solution
    Company offered 2,00,000 shares for subscription to the public but the applications where received for 1,90,00 shares, only. In such a situation, the allotment will be confirmed to 1,90,000 shares and entries shall be made accordingly. However, it must be ensured that the company has received the minimum subscription (not less than 90% of the offer) otherwise the procedure for issue of shares cannot proceed further and the company will have to refund the entire subscription amount received.
  • Question 4
    1 / -0
    Under issue of shares for consideration other than cash, the number of shares to be issued to the vendor will be calculated as ___________________.
    Solution
    There are instances where a company enters into an arrangement with the vendors from whom it has purchased assets, whereby the latter agrees to accept, the payment in the form of fully paid shares of the company issued to them. Normally, no cash is received for such issue of shares. These shares can also be issued either at par, at premium or at discount, and the number of shares to be issued will depend upon the price at which the shares are issued and the amount payable to the vendor. Thus, to find the number of shares to be issued to the vendor will be calculated as follows:
    No. of shares to be issued = Amount Payable/Issue Price.
  • Question 5
    1 / -0
    Which of the following should be deducted from the share capital to find out paid-up capital?
  • Question 6
    1 / -0
    ABC Ltd. invited applications for issue of $$100,000$$ shares of $$Rs. 10$$ each at a premium of $$Rs. 2, Rs. 5$$ called at the time of application, $$Rs. 5$$ (including premium) at the time of allotment and balance $$Rs. 2$$ at the time of $$1st$$ call. Applications were received for $$1,30,000$$ shares. Application money was returned to the extent to $$10,000$$ shares and pro rate allotment was made to the remaining applicants of $$120,000$$. PQR to whom $$500$$ shares were allotted failed to pay allotment and calls money. Based allotted on the above facts, cash/ bank a/c would be debited by ___________ at the time of receipt of allotment money.
    Solution

  • Question 7
    1 / -0
    The maximum amount beyond which a company cannot raise share capital is called its _________.
    Solution
    As per section 2(8) of companies act, 2013 'Authorised capital' is the maximum amount of the capital for which shares can be issued by the company to shareholders. It is mentioned in the Memorandum of association of company, decided prior to the incorporation of the company.
  • Question 8
    1 / -0
    Dividends are usually paid on __________.
    Solution

    The Companies Act, 2013 lays down certain provisions for declaration of dividend, which are:

    1. Section 51 permits companies to pay dividends proportionately, i.e. in proportion to the amount paid-up on each share when all shares are not uniformly paid up, i.e. pro rata. Pro rata means in proportion or proportionately, according to a certain rate. The Board of Directors of a company may decide to pay dividends on a pro rata basis if all the equity shares of the company are not equally paid- up.

    2. The permission given by this section is, however, conditional upon the Company’s Articles of Association (AOA) expressly authorizing the Company in this regard.

  • Question 9
    1 / -0
    When the full amount due in any call is not received the shortfall is debited to ___________.
  • Question 10
    1 / -0
    XYZ Ltd. invited applications for public issue of $$20,000$$ equity shares of $$Rs. 10$$ each at a premium of $$Rs. 2$$, payable as under $$Rs. 2$$ on applications, $$Rs. 3$$ on allotment, $$Rs. 5$$ on first call (including premium) and balance on second and final call. Applications were received for $$30,000$$ shares, pro rate allotment was made for $$24,000$$ applications and the remaining applications were rejected. Vinay, who applied for $$4800$$ shares, failed to pay second call. Consequently his shares were forfeited and re-issued at $$Rs. 6$$. What amount would be transferred to Capital reserve A/c after the reissue of the forfeited shares?
    Solution

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