Accounting for Share Capital

Q1 FREE PREVIEW

Balance of Share Forfeiture A/c is shown in the Balance Sheet under the item

a

Share Capital A/c

b

Current Liabilities and Provision

c

Unsecured loan

d

Reserve and Surplus

✓ Correct answer: a)

Share Capital A/c

ExplanationCorrect Answer: (A) Share Capital Why Correct?

When shares are forfeited, the amount already received from shareholders is transferred to the Share Forfeiture Account.
In the Balance Sheet, this balance is shown under the head Share Capital, as:

Share Capital
Add: Forfeited Shares Account

Since this amount originally formed part of share capital, it is added under the Share Capital head.
Therefore, the correct answer is (A) Under Share Capital.

Why Other Options Are Incorrect?

(B) Current Liabilities and Provisions — Incorrect
Share forfeiture is not a liability of the company.

(C) Unsecured Loans — Incorrect
It is not a loan; it is related to shareholders’ capital.

(D) Reserves and Surplus — Incorrect
Only the surplus transferred after reissue of forfeited shares goes to Capital Reserve, not the forfeiture balance itself.

Q2 FREE PREVIEW

Capital included in the Liabilities of a company is called :-

a

Authorised Capital

b

Subscribed Capital

c

Issued Capital

d

Paid-up Capital

✓ Correct answer: d)

Paid-up Capital

Explanation

Correct Answer: (D) Paid-up Capital

Why Correct?

In the Balance Sheet, only the amount actually received from shareholders is shown on the liabilities side as the company’s obligation.
This amount is called Paid-up Capital.
Hence, the capital added to the liabilities of the company is Paid-up Capital.

Why Other Options Are Incorrect?

(A) Authorized Capital — Incorrect
It only shows the maximum limit of capital; it is not a liability.

(B) Issued Capital — Incorrect
It represents the capital offered to the public, not necessarily received.

(C) Subscribed Capital — Incorrect
It shows the amount agreed to be taken by shareholders, but liability exists only to the extent of paid-up amount.

Q3

A share of ₹10, on which ₹8 was called up, was forfeited for non-payment of ₹5. This share can be reissued at a minimum price of:

a

₹10

b

₹8

c

₹11

d

₹7

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Q4

A company is incorporated by

a

A Special Act of Parliament

b

Companies Act

c

Agreement of investors

d

Both (A) and (B)

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Q5

The shares of ₹10 was issued at a premium of ₹3 payable as:

₹3 on Application

₹5 on Allotment (including premium)

Balance on First and Final Call.

A shareholder, who had applied for 100 shares, was allotted only 50 shares and due to non-payment of allotment money his shares were forfeited.

At the time of forfeiture, the amount to be debited to Securities Premium A/c will be:

a

₹250

b

₹50

c

₹100

d

₹150

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Q6

R Limited purchased a building from X Infra for ₹6,00,000 and the payment is to be made by the issue of shares for ₹100 each at a premium of 20%. Calculate the number of shares to be issued.

a

5,000 shares

b

6,000 shares

c

10,000 shares

d

6,00,000 shares

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Q7

Match List-I with List-II

List I	List II
(A) Share capital	(I) Will be called at the time of winding up
(B) Reserves and surplus	(II) Calls in advance
(C) Reserve capital	(III) Subscribed but not fully paid
(D) Current liabilities	(IV) Sinking fund

a

(A) - (I), (B) - (II), (C) - (III), (D) - (IV)

b

(A) - (I), (B) - (III), (C) - (II), (D) - (IV)

c

(A) - (I), (B) - (II), (C) - (IV), (D) - (III)

d

(A) - (III), (B) - (IV), (C) - (I), (D) - (II)

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Q8

A company has :-

a

Separate Legal entity

b

Perpetual Existence

c

Limited Liability

d

All of the above

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Q9

Which of the following statements are true with reference to a 'company'?

(A) The directors of the company are the owners of the company.

(B) A company is an artificial person.

(C) A company has its common seal.

(D) The liability of the members of the company is limited to the extent of shares held by them.

Choose the correct answer from the options given below:

a

(A), (B) and (D) only

b

(A), (B) and (C) only

c

(A), (B), (C) and (D)

d

(B), (C) and (D) only

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Q10

The amount received over and above the par value is credited to which account?

a

Share Capital A/c

b

Calls-in-advance A/c

c

Securities Premium A/c

d

Share Forfeiture A/c

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Q11

Match List I with List II

List I	List II
1) Authorised Capital	a) Mentioned in the prospectus
2) Issued Capital	b) Mentioned in the Memorandum of Association
3) Subscribed Capital	c) Called up Capital - Calls-in-arrear
4) Paid up Capital	d) Capital for which application is received

a

1(a), 2(b), 3(c), 4(d)

b

1(a), 2(c), 3(b), 4(d)

c

1(b), 2(a), 3(d), 4(c)

d

1(c), 2(d), 3(a), 4(b)

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Q12

Maximum number of members in a public company is :-

a

7

b

200

c

20

d

No limit

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Q13

A company issues its shares at a premium under which section of Indian Companies Act, 2013?

a

78

b

52

c

53

d

None of these

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Q14

Arrange the following events in proper order.

Transfer to Capital Reserve
Forfeiture of Share
Calls in Arrear
Reissue of Share

a

1,2,3,4

b

1,2,4,3

c

2,1,4,3

d

3,2,4,1

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Q15

Sweat equity shares are issued to

a

Employees

b

Directors

c

Both (A) and (B)

d

None of them

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Q16

Pro-rata allotment of shares is made when there is :-

a

Under-Subscription

b

Over-Subscription

c

Equal-Subscription

d

All of the above

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Q17

Securities Premium can be utilised for:

Writing off Preliminary Expenses
Issue of Bonus Shares
Payment of dividends
Buyback of shares

a

1,2, and 4 only.

b

1,2, and 3 only.

c

1,2,3, and 4

d

2,3, and 4 only

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Q18

Calls–in–arrears is shown in the balance sheet as:

a

Current Assets

b

A deduction from paid-up capital

c

Reserve and Surplus

d

Current Liability

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Q19

The liability of members in a company is

a

Limited.

b

Unlimited

c

Stable

d

Fluctuating

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Q20

Discount on issue of share is

a

Capital gain

b

Capital loss

c

Revenue gain

d

Revenue loss

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Q21

Reserve Capital is:

a

A kind of capital reserve.

b

A part of called-up capital.

c

A part of subscribed capital decided not to be called except in the event of winding up of the company.

d

A part of capital not yet issued.

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Q22

In what condition the amount is shown under the head of 'Subscribed and fully paid up Share Capital in balance Sheet of a Company?

a

If shares are fully called up and there are calls in arrears.

b

If shares are fully called up and there are no calls in arrears.

c

If shares are partly called up and there are no calls in arrears.

d

If shares are partly called up and there are calls in arrears.

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Q23

When amount is due on any call but it is not received, then the short
fall is debited to :-

a

Calls-in-advance

b

Calls-in-arrear

c

Share Capital

d

Suspense Account

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Q24

To whom is dividend given at a fixed rate in a company?

a

Equity shareholders

b

Preference shareholders

c

Debenture holders

d

Promoters

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Q25

A company issued 10,000 shares of Rs. 10 each at a premium of 10%. The amount of premium will be

a

Rs. 10,000

b

Rs. 20,000

c

Rs. 8,000

d

Rs. 5,000

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