Accounting for Share Capital Class 12 MCQs Questions with Answers
Share Capital MCQs Class 12 Chapter 6 Question 1.
Reserve capital is not a part of:
(A) Authorised Capital
(B) Subscribed Capital
(C) Unsubscribed Capital
(D) Issued Capital
Answer:
(C) Unsubscribed Capital
Accounting For Share Capital MCQ Question 2.
The part of authorized capital which can be called up only on the company being wound up is called :
(A) Issued Capital
(B) Unsubscribed Capital
(C) Reserve Capital
(D) None of these
Answer:
(C) Reserve Capital
Explanation:
Reserve capital represents the portion of subscribed capital that remains un-called except in case of winding up or at the time of liquidation.
Share Capital MCQ Class 12 Chapter 6 Question 3.
The owners of the shares are called :
(A) Share Capital
(B) Shareholders
(C) Creditors
(D) Debtors
Answer:
(B) Shareholders
Explanation:
As the shareholders are the owners of the share capital, they are called the owners of the shares of the company.
Share Capital Of A Company Means MCQ Question 4.
The first stage of incorporating a company is:
(A) Registration
(B) Promotion
(C) Commencement of business
(D) None of the above
Answer:
(B) Promotion
Explanation:
The incorporation of a company as per the Companies Act, 2013 begins with its promotion.
Accounting For Share Capital Class 12 MCQ Question 5.
Those preference shares which do not carry the right to receive arrears of dividend:
(A) Non-participating Preference Shares
(B) Irredeemable Preference Shares
(C) Non-convertible Preference Shares
(D) Non-cumulative Preference Shares
Answer:
(D) Non-cumulative Preference Shares
Explanation:
The non-cumulative preference shares are the shares which do not carry the right to receive arrears of dividend. Non-participating Preference Shares are the shares which do not have a share in surplus profits and on which only a fixed rate of dividend is paid. Non-convertible Preference Shares are the preference shares which don’t have the right to be converted into equity shares. Preference shares which don’t have any maturity date are called irredeemable preference shares.
Share Capital Class 12 MCQ Chapter 6 Question 6.
ESOP offered by company will create / retain :
(A) A sense of belongingness in employees
(B) High calibre
(C) High Productivity
(D) All of the above
Answer:
(D) All of the above
Explanation:
The employee stock ownership plan is giving the shares to the employees in order to create a sense of belongingness in employees and creates high calibre and productivity of employees.
Share Capital MCQ Class 12 Chapter 6 Question 7.
Pick the odd one out:
(A) Irredeemable preference share
(B) Participating preference share
(C) Cumulative preference share
(D) Open-ended preference share
Answer:
(D) Open-ended preference share
Explanation:
Open ended preference shares is not a type of preference share rest all are the types of preference share.
MCQ Of Share Capital Class 12 Chapter 6 Question 8.
Subscription of shares should not be less than % of the issued shares.
(A) 85%
(B) 90%
(C) 95%
(D) 100%
Answer:
(B) 90%
Accounting For Share Capital MCQs Class 12 Question 9.
A company forfeited 4,0(N) shares of 10 each on which application money of 3 has been paid. Out of these 2,000 shares were reissued as fully paid up and 4,000 has been transferred to capital reserve. Calculate the rate at which these shares were reissued:
(A) ₹ 10 per share
(B) ₹ 9 per share
(C) ₹ 11 per share
(D) ₹ 8 per share
Answer:
(B) ₹ 9 per share
Explanation:
As the amount in the forfeiture share account is ₹ 6,000 and ₹ 4,000 was transferred to the capital reserve account. Thus, ₹ 2,000 was the discount given, making the discount ₹ 1 per share. Thus the share was issued at ₹ 9 per share.
MCQs Of Share Capital Class 12 Chapter 6 Question 10.
Vanya Ltd. forfeited 20,000 equity shares of ₹ 100 each for non-payment of first and final call of ₹ 40 per share. The maximum amount of discount at which these share can be re-issued will be :
(A) ₹ 8,00,000
(B) ₹ 12,00,000
(C) ₹ 20,00,000
(D) ₹ 20,000
Answer:
(B) ₹ 12,00,000
Explanation:
Amount forfeited at the time of forfeiture of shares
= ₹ 20,000 x 60
= ₹ 12,00,000
MCQ Of Share Capital Chapter 6 Class 12 Question 11.
Which of the following is not a purpose for which the Securities Premium amount can be used?
(A) Issuing fully paid bonus shares to shareholders
(B) Issuing partly paid-up bonus shares to shareholders
(C) Writing off preliminary expenses of the company
(D) In purchasing its own shares (buyback)
Answer:
(B) Issuing partly paid-up bonus shares to shareholders
Explanation:
The securities premium amount cannot be used to issue partly paid-up bonus shares to shareholders, as the shares are partly paid up.
It can only be used for:
- To issue fully paid-up bonus shares to the shareholders.
- To write off preliminary expenses of the companies.
- To write off the commission paid or expenses on the issue of shares/debentures.
- To pay a premium on the redemption of preference shares or debentures of the company.
- Buy-back of equity shares and other securities as per Section 68.
Accounting For Shares Class 12 MCQ Question 12.
A forfeited share can :
(A) not be re-issued at discount
(B) re-issued at a maximum discount of 10%
(C) be re-issued at a maximum discount equal to the amount forfeited
(D) None of the above
Answer:
(C) be re-issued at a maximum discount equal to the amount forfeited
Explanation:
The discount on the reissue of forfeited shares cannot be more than the forfeited amount of the shares, so it can be issued at a discount and it can be more than 10% if the forfeited amount is more than 10%.
MCQ On Share Capital Class 12 Chapter 6 Question 13.
When forfeited shares are re-issued the amount of discount allowed on these shares cannot exceed :
(A) 10% of called-up capital per share
(B) 6% of paid-up capital per share
(C) The amount received per share on forfeited shares
(D) The unpaid amount per share on forfeited shares
Answer:
(C) The amount received per share on forfeited shares
Share Capital MCQ Questions Class 12 Question 14.
Gama Chemicals Ltd. is a newly formed company. How much discount per share can it allow for issuing its shares to the public ?
(A) 6%
(B) 10%
(C) 5%
(D) None of these
Answer:
(D) None of these
Explanation:
A company cannot issue its shares at a discount as per the Companies Act, 2013.
Question 15.
Share Allotment Account is a/an :
(A) Personal Account
(B) Real Account
(C) Nominal Account
(D) None of these
Answer:
(A) Personal Account
Explanation:
Share Application or Share Allotment or Share Capital A/c, all are personal accounts as they represent money from the shareholders.
Question 16.
Balance in Share Forfeiture Account is shown in the balance sheet under the head of:
(A) Reserves and Surplus
(B) Long-term Borrowings
(C) Share Capital
(D) Other Current Liabilities
Answer:
(C) Share Capital
Explanation:
As the share forfeiture form the share capital it is shown in the share capital head of the Balance Sheet.
Question 17.
Pick the odd one out:
(A) Issue of shares to vendors
(B) Issue of shares to general public
(C) Issue of shares to underwriters
(D) Issue of shares to promoters
Answer:
(B) Issue of shares to general public
Explanation:
Issue of shares to general public is the only one which is not done to settle previous debt but to raise share capital.
Question 18.
Identify the journal entry for the issue of forfeited shares at par.
| Particulars | L.F | Amount Dr. (₹) | Amount Cr. (₹) |
| (A) Bank A/c Dr.
To Share Capital A/c |
|||
| (B) Bank A/c Dr.
Share Forfeiture A/c Dr. To Share Capital A/c |
|||
| (C) Share Forfeiture A/c Dt
To Share Capital A/c |
|||
| (D) Noneof these |
Answer:
Option (A) is correct.
Explanation:
The journal entry for the reissue of forfeited share will be the same as the issue of shares.
Question 19.
Ltd. invited applications for 10,000 shares of ₹ 10 each. Applications were received for 9,000 shares. Identify the kind of subscription.
(A) Under Subscription
(B) Over Subscription
(C) Full Subscription
(D) None of the above
Answer:
(A) Under Subscription
Explanation:
As out of 10,000 shares, application was received only for 9,000 shares. This is a case of under subscription of shares.
Question 20.
HR Limited issued 10,000 equity shares ₹ 10 each at 10% premium. All shares were subscribed and amount was received. Identity the amount to be transferred to Securities Premium Reserve A/c.
(A) ₹ 10,000
(B) ₹ 1,000
(C) ₹ 1,00,000
(D) ₹ 9,000
Answer:
(A) ₹ 10,000
Explanation:
Total value of shares = 10,000 x ₹ 10 = ₹ 1,00,000
Premium = 10% of 1,00,000 = ₹ 10,000
Thus, ₹ 10,000 will be transferred to the securities premium account.
Question 21.
The Journal Entry to acquire an asset from vendor will be :
| Particulars | L.F | Amount Dr. (₹) | Amount Cr. (₹) |
| (A) Sundry AsseLs AJc
To Vendors A/c |
|||
| (B) Vendors A/c Dr.
To Sundry Assets A/c |
|||
| (C) Sundry Assets A/c Dr
To Cash A/c |
|||
| (D) Cash A/c
To Vendor’s A/c |
Answer:
(A) Sundry Assets A/c Dr.
To Vendor’s A/c
Explanation:
When the asset is acquired from the vendor, the sundry asset account is debited and vendor’s account is credited with that amount.
Assertion And Reason Rased MCQs
Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.
Question 1.
Assertion (A): A share is a fractional part of the share capital and forms the basis of ownership interest in a company.
Reason (R): Shares refer to the units into which the total share capital of the company is divided.
Answer:
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
Explanation:
Shares are the fractional part or the unit of share capital forming the basis of ownership of company because buying a share by a person makes him/her a shareholder and thus the owner to the extent of the shares purchased.
Question 2.
Assertion (A): The equity shareholders are paid dividend on the shares held by them.
Reason (R): As the equity shareholders are the owners and dividend form their earning.
Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
Explanation:
The equity shareholders are given dividend as per the shares hold by them from the profit earned by the company as they get the ownership of the company to the extent of shares hold by them.
Question 3.
Assertion (A): Preference shareholders are given a fixed rate of dividend even if the company earns no profit.
Reason (R): The preference shares have preferential right of dividend to be paid as fixed amount or an amount calculated at a fixed rate, which may either be free of or subject to income tax.
Answer:
(D) Assertion (A) is false, but Reason (R) is true.
Explanation:
If the company does not earn profit, the preference shareholders are not given dividend as dividend cannot be declared in case of no profit even if they have preferential rights.
Question 4.
Assertion (A): Authorised share capital is not issued to the public at once.
Reason (R): Companies do not exhaust their authorised capita] in the beginning but only a part of the authorised capital is issued for public subscription. Rest of the authorised capital is raised by the company in a phased manner depending on the need for funds.
Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
Question 5.
Assertion (A): The securities premium amount received by the company will be shown in the balance sheet directly.
Reason (R): Securities premium account is the a capital receipt.
Answer:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
Question 6.
Assertion (A): The security premium amount can be used to issue partially paid up bonus shares.
Reason (R): According to Section 52(2) of the Companies Act, 2013, the amount of Securities Premium Reserve can be used only for some specific purposes.
Answer:
(D) Assertion (A) is false, but Reason (R) is true.
Exploitation:
According to Section 52(2) of the Companies Act, 2013, the amount of Securities Premium Reserve can be used only for the following purposes:
- To issue fully paid-up bonus shares to the shareholders.
- To write off preliminary expenses of the companies.
- To write off the commission paid or expenses on issue of shares/debentures.
- To pay premium on the redemption of preference shares or debentures of the company.
- Buy-back of equity shares and other securities as per Section 68.
Question 7.
Assertion (A): Tara Ltd. gave shares worth ₹ 1,50,000 to the vendor from whom they bought a machinery.
Reason (R): The company can issue shares as against the payment to the vendors.
Answer:
Option (A) is correct
Explanation:
Instead of paying the amount, the company can issue shares to the vendors from the authorised share capital, at par, premium or discount.
Question 8.
Assertion (A): Govind Ltd. invited applications for issuing 20,00,000 equity shares of ₹ 10 each. The public applied for 17,10,000 shares. The company cannot proceed for the allotment of shares.
Reason (R): The application can only be processed if the company receives a minimum of 12.5% subscription.
Answer:
Option (C) is correct.
Explanation:
The company can only proceed with the allotment when it receives 90% of the application for subscription.
Case-Based MCQs
I. Based on below information, you are required to answer the following questions:
Nidiya Limited was incorporated on 1st April 2017 with registered office in Mumbai. The capital clause of memorandum of Association reflected a registered capital of 8,00,000 equity shares of ₹ 10 each and 1,00,000 preference shares of ₹ 50 each. Since some large investments were required for building and machinery the company in consultation with vendors, M/s VPS Enterprises, issued 1,00,000 equity shares and 20,000 preference shares at par to them in full consideration of assets acquired.
Besides this the company issued 2,00,000 equity shares for cash at par payable as ₹ 3 on application, 2 on allotment, 3 on first call and 2 on second call. Till date second call has not yet been made and all the shareholders have paid except Mr. Ajay who did not pay allotment and calls on his 300 shares and Mr. Vipul who did not pay first call on his 200 shares. Shares of Mr. Ajay were then forfeited and out of them 100 shares were reissued at ₹ 12 per share.
Question 1.
Shares issue to vendors of building and machinery, Ms. VPS Enterprises, would be classified as:
(A) Preferential Allotment
(B) Employee Stock Option Plan
(C) Issue for consideration other than cash
(D) Right Issue of Shares
Answer:
(C) Issue for consideration other than cash
Question 2.
How many equity shares of the company have been subscribed?
(A) 3,00,000
(B) 2,99,500
(C) 2,99,800
(D) None of the above
Answer:
(C) 2,99,800
Explanation:
No. of shares forfeited at the end of the year: 200
Question 3.
What is the amount of security premium reflected in the balance sheet at the end of the year?
(A) ₹ 200
(B) ₹ 600
(C) ₹ 400
(D) ₹ 1,000
Answer:
(C) ₹ 400
Explanation:
Called-up amount = ₹ 8 per share Re-issue amount = ₹ 12 per share ‘
Premium = ₹ 4 per share Number of shares re-issued = 100 Security premium reflected in the balance sheet at the end of the year = 100 x ₹ 4 = ₹ 400
Question 4.
What amount of share forfeit tie would be reflected in the balance sheet?
(A) ₹ 600
(B) ₹ 900
(C) ₹ 200
(D) ₹ 300
Answer:
(A) ₹ 600
Explanation:
No. of shares forfeited at the end of the year: 200 Amount of sharexfofteiture to be reflected in the balance sheet: 200 x ₹ 3 = ₹ 600
II. Based on below information you are required to answer the following questions:
The directors of Bhagat and Company Ltd. issued 50,0 equity shares of ₹ 10 each at ₹ 12 per share, payable as ₹ 5 on application including the premium,₹ 4 on allotment and the balance on final call. Applications were received for 70,000 shares out of which applications for 8,000 shares were rejected and their money was refunded. Money overpaid on application was applied towards sums due on allotment. All the money were duly received except from one shareholder holding 500 shares who failed to pay the final call money.
Question 1.
What is the amount received on application of shares?
(A) ₹ 3,50,000
(B) ₹ 2,80,000
(C) ₹ 1,50,000
(D) ₹ 60,000
Answer:
(A) ₹ 3,50,000
Explanation:
Application ₹ 70,000 shares are received at the rate of ₹ 5 inclusive of the. premium of ₹ 2.70,0 x ₹ 5 = ₹ 3,50,000
Question 2.
What is the amount that will be transferred to the securities premium account?
(A) ₹ 1,50,000
(B) ₹ 1,00,000
(C) ₹ 60,000
(D) ₹ 40,000
Answer:
(B) ₹ 1,00,000
Explanation:
As only 50,000 shares were issued.
50,000 x ₹ 2 = ₹ 1,00,000
Question 3.
What is the amount to be received on the Allotment of share?
(A) ₹ 2,00,000
(B) ₹ 1,40,000
(C) ₹ 1,50,000
(D) ₹ 1,00,000
Answer:
(B) ₹ 1,40,000
Explanation:
As ₹ 60,000 out of ₹ 2,00,000 is already received so only ₹ 1,40,000 is to be received.
Question 4.
How much money is still not paid up on the allotted shares?
(A) ₹ 1,500
(B) ₹ 2,000
(C) ₹ 3,000
(D) ₹ 500
Answer:
(A) ₹ 1,500
Explanation:
The first and final call amount (₹ 3) is not received on 500 shares.
500 x ₹ 3 = ₹ 1,500
III. Based on below information you are required to answer the following questions:
Sangita Limited invited applications for issuing ₹ 60,0 shares of ₹ 10 each at par. The amount was payable as follows: On Application ₹ 2 per share On Allotment ₹ 3 per share One First and Final Call ₹ 5 per share Applications were received for 92,000 shares. Allotment was made on the following basis :
(i) To applicants for 40,000 shares – Full
(ii) To applicants for 50,000 shares – 40%
(iii) To applicants for 2,000 shares – Nil
₹ 08,000 was realised on account of allotment (excluding the amount carried from application money) and ₹ 2,50,000 on account of call. The directors decided to forfeit shares of those applicants to whom full allotment was made and on which allotment money was overdue.
Question 1.
The above case shows which of the following case of subscription?
(A) Undersubscription
(B) Oversubscription
(C) Subscription at par
(D) None of the above
Answer:
(B) Oversubscription
Question 2.
How many shares will be issued for the applicants on 50,000 shares?
(A) 50,000
(B) 40,000
(C) 30,000
(D) 20,000
Answer:
(D) 20,000
Explanation:
40% of 50,000 = 20,000
Question 3.
How much allotment amount is already received during application?
(A) ₹ 60,0000
(B) ₹ 40,000
(C) ₹ 1,00,000
(D) ₹ 4,000
Answer:
(A) ₹ 60,0000
Explanation:
30,000 x ₹ 2 = ₹ 60,000 received extra from the group of 50,000 shares is to be adjusted in the share allotment.
Question 4.
What amount is received at the time of first and final call?
(A) ₹ 3,00,000
(B) ₹ 2,50,000
(C) ₹ 3,50,000
(D) ₹ 2,75,000
Answer:
(B) ₹ 2,50,000