Balbharti Maharashtra State Board 12th Commerce Book Keeping & Accountancy Important Questions Chapter 8 Company Accounts – Issue of Shares Important Questions and Answers.
Maharashtra State Board 12th Commerce BK Important Questions Chapter 8 Company Accounts – Issue of Shares
1. Objective Questions:
A. Select the appropriate answer from the alternative given below and rewrite the sentence.
Question 1.
Nominal value of shares allotted to the public is called ____________ capital.
(a) authorised
(b) reserve
(c) paid-up
(d) subscribed
Answer:
(d) subscribed
Question 2.
Paid-up value of all shares allotted is called ____________ capital.
(a) uncalled
(b) issued
(c) subscribed
(d) nominal
Answer:
(c) subscribed
Question 3.
If the articles are silent regarding interest on Calls-in-Arrears, the minimum rate of interest to be charged is ____________
(a) 5% p.a.
(b) 6% p.a.
(c) 8% p.a.
(d) none of these
Answer:
(a) 5% p.a.
Question 4.
If the articles are silent regarding interest on Calls-in-Advance, the minimum rate of interest to be charged is ____________ p.a.
(a) 5%
(b) 6%
(c) 8%
(d) none of these
Answer:
(b) 6%
Question 5.
____________ is deducted from the share capital to know paid-up value of shares.
(a) Calls-in-Advance
(b) Calls-in-Arrears
(c) Forfeited Shares
(d) Discount on Issue
Answer:
(b) Calls-in-Arrears
Question 6.
The excess price received over the par value of shares should be ____________ to Securities Premium A/c.
(a) debited
(b) credited
(c) adjusted
(d) none of these
Answer:
(b) credited
Question 7.
The capital with which a company is registered is called ____________
(a) Issued Capital
(b) Subscribed Capital
(c) Authorised Capital
(d) Called-up Capital
Answer:
(c) Authorised Capital
Question 8.
If a share of ₹ 100 is issued at ₹ 90, it is said to be issued ____________
(a) at par
(b) at a discount
(c) at a premium
(d) none of these
Answer:
(b) at a discount
Question 9.
If a share of ₹ 100 is issued at ₹ 100, it is said to be issued ____________
(a) at par
(b) at premium
(c) at discount
(d) none of these
Answer:
(a) at par
Question 10.
If a share of ₹ 100 is issued at ₹ 110, it is said to be issued ____________
(a) at par
(b) at a premium
(c) at a discount
(d) none of these
Answer:
(b) at a premium
B. Give one word/term/phrase for each of the following statements.
Question 1.
The capital is not disclosed in the Balance Sheet.
Answer:
Reserve capital
Question 2.
Preference share on which arrears of dividend accumulate.
Answer:
Cumulative preference shares
Question 3.
A preference share having the right of conversion into equity.
Answer:
Convertible preference shares
Question 4.
The account to which excess amount on Share Forfeited A/c is transferred.
Answer:
Capital Reserve Account
Question 5.
The maximum amount beyond which a company is not allowed to raise its share capital.
Answer:
Authorised/Nominal capital
Question 6.
Deduction made from share capital to find out paid-up capital.
Answer:
Calls-in-Arrears
Question 7.
The capital on which dividend is paid.
Answer:
Paid-up share capital
Question 8.
Shares having voting rights.
Answer:
Equity shares
Question 9.
Part of the authorised capital is offered by the company to the public to subscribe for.
Answer:
Issued capital
Question 10.
Part of the uncalled capital is called up at the time of winding up of the company.
Answer:
Reserve capital
Question 11.
Shares that do not preference shares.
Answer:
Equity shares
Question 12.
Shares enjoy preferential rights in the matter of payment of dividends and repayment of capital.
Answer:
Preference shares
Question 13.
The direct sale of shares by a company to a limited number of sophisticated investors.
Answer:
Private placement of shares
Question 14.
A demand made by the company after allotment of shares to pay the remaining amount of shares.
Answer:
Call on share
C. State true or false with reasons.
Question 1.
In private placement, shares are issued to the public through the prospectus.
Answer:
This statement is False.
‘Private placement’ means a direct private offering of the company’s securities by a company to a selected group of sophisticated investors. In private placement, shares are not issued to the public through the prospectus.
Question 2.
In public issues whole amount of share, capital is called at once.
Answer:
This statement is False.
In public issues whole amount of share, capital is not called at once but called in several installments such as application money, allotment money and calls money by following SEBI guidelines.
Question 3.
Shares are always issued at par.
Answer:
This statement is False.
Depends on the company’s position in the market, the company can issue shares at par or at a premium, or a discount.
Question 4.
Share forfeited balance is transferred to Capital Reserve Account.
Answer:
This statement is True.
Share forfeited balance is a profit earned by the company at the time of issuing shares, which is not recurring in nature. It is also known as capital profit. Therefore it is to be transferred to Capital Reserve Account.
Question 5.
Shares are issued for cash only.
Answer:
This statement is False.
The company issues shares for cash and also for consideration other than cash. Shares are issued by the company to the vendor for the purchase of land, machinery, etc. In such cases, money is not paid, but shares are issued by the company for value received.
Question 6.
Preference shares can be redeemed after a certain period of time.
Answer:
This statement is True.
When a provision of Articles of Association permits, Preference shares can be redeemed after a certain period of time with other preferential rights like a preference for the payment of dividend at a predetermined fixed rate and for repayment of capital.
Question 7.
Authorised capital of a company is always equal to its issued capital.
Answer:
This statement is False.
Authorized capital means the maximum limit up to which a company is authorised to raise share capital while issued capital means capital that is issued or offered for subscription to the public. Issued capital is a part of authorised capital. So, authorised capital and issued capital can’t be equal for a company.
D. State whether you agree or disagree with the following statements.
Question 1.
Equity shareholders enjoy preferential rights.
Answer:
Disagree
Question 2.
An equity share is a guarantee of a fixed rate of dividend.
Answer:
Disagree
Question 3.
The private placement method saves time and cost.
Answer:
Agree
Question 4.
Shares can be issued at par or at a discount or a premium.
Answer:
Agree
Question 5.
A public company forfeits shares on nonpayment of the final call only.
Answer:
Disagree
Question 6.
Forfeited shares are reissued at par.
Answer:
Disagree
Question 7.
Calls-in-Arrears are also called unpaid calls.
Answer:
Agree
Question 8.
The balance of the Calls-in-Advance account is shown in the Balance Sheet under the head ‘Share Capital’.
Answer:
Agree
Question 9.
Sweat shares can be issued for consideration other than cash.
Answer:
Agree
Question 10.
Equity shares are issued to the public through the prospectus.
Answer:
Agree
E. Answer in one sentence only.
Question 1.
What is Owned Capital?
Answer:
The capital collected through the issue of shares is known as Owned Capital.
Question 2.
State the types of shares.
Answer:
There are two types of shares viz.
- Equity or Ordinary Shares
- Preference Shares
Question 3.
What is Subscribed Capital?
Answer:
Subscribed Capital is a part of the issued capital which the company has actually received by way of application from the public and also allotted by the company.
Question 4.
What is Under Subscription?
Answer:
When a company received applications for shares less than those actually offered or issued to the public, the issue is said to be undersubscribed.
Question 5.
State the meaning of issued capital.
Answer:
The part of the portion of authorised capital which is issued or offered for subscription to the public is called issued capital.
Question 6.
Define Share.
Answer:
The owned capital of a company when divided into a large number of parts having equal face value, each such part is called a ‘Share’.
Question 7.
What is Equity Share?
Answer:
An equity share is one that has no special preferential right to dividend or repayment of capital.
Question 8.
Write the meaning of Equity Share Capital.
Answer:
The capital raised by the company through the issue of equity shares is called equity share capital.
Question 9.
What is meant by Convertible Preference Share?
Answer:
Preference share which can be converted into equity share after a certain period is called Convertible Preference Share.
Question 10.
Which preference shares are called Cumulative Preference Shares?
Answer:
Preference shares in which unpaid dividend in a year gets accumulated and added in the dividend of the next year are called Cumulative Preference Shares.
Question 11.
What is Allotment qf Shares?
Answer:
Allotment of shares means after considering the demand of the applicants, accepting application forms up to certain fixed numbers as per the resolution passed in the meeting of the board of directors.
Question 12.
What is meant by a Discount on the Issue of Shares?
Answer:
When shareholders are supposed to pay a price lower than the face value of the shares, then the shares are said to be issued at discount.
Question 13.
Give the full form of SEBI.
Answer:
The full form of SEBI is the Securities Exchange Board of India.
Question 14.
Define Calls-in-Advance.
Answer:
Calls-in-Advance is that amount paid by the shareholders in excess of the call amount due from them. .
Question 15.
Define Securities Premium Account.
Answer:
In case of issue of shares at a premium, a separate account into which premium amount is deposited is called ‘Securities Premium Account’.
Question 16.
When are shares said to be issued at par?
Answer:
Shares are said to be issued at par when the company issues shares at their face value.
F. Complete the following sentences.
Question 1.
The portion of Subscribed capital which has not yet been called-up is ____________
Answer:
Uncalled capital
Question 2.
The capital which is not disclosed in the Balance Sheet is known as ____________
Answer:
Reserve capital
Question 3.
____________ shares have voting right.
Answer:
Equity
Question 4.
The liability of shareholder of public limited company is ____________
Answer:
limited
Question 5.
____________ shares are issued to public through prospectus.
Answer:
Equity
Question 6.
In public issue whole amount of share capital is called in ____________
Answer:
instalments
Question 7.
A public company ____________ share on non-payment of call money.
Answer:
forfeits
Question 8.
Share forfeited balance is transferred to ____________ Account.
Answer:
Capital Reserve
Question 9.
Preference shares can be ____________ after certain period of time.
Answer:
redeemed
Question 10.
____________ shares have a right to participate in decision making process.
Answer:
Equity
Solved Problems
Question 1.
Kandla Co. Ltd. made an issue of 80,000 equity shares of ₹ 20 each payable as follows:
Application: ₹ 5 per share
Allotment: ₹ 10 per share
First Call: ₹ 3 per share
Second and Final Call: ₹ 2 per share
The company received applications for 90,000 shares of which applications for 10,000 shares were rejected and money refunded. All the shareholders paid up to the second call except Sachin, the allottee of 4,000 Shares, who failed to pay a final call.
Pass Journal Entries for the above transaction in the books of Kandla Co. Ltd.
Solution:
Journal Entries in the books of KANDLA CO. LTD.
Question 2.
Vraj Ltd. issued 20,000 equity shares of ₹ 20 each, payable as follows:
On Application: ₹ 4
On Allotment: ₹ 6
On First Call: ₹ 6
On Second Call: ₹ 4
The company received applications for 25,000 equity shares. Allotment of shares was made on a pro-rata basis. Share allotment and calls were made and as also received except Raja holding 500 shares failed to pay both the calls. His shares were forfeited after the second call.
Record the above transactions in the books of Vraj Ltd.
Solution:
Journal Entries in the books of VRAJ LIMITED
