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Equity shares = 10,000

Face value = ₹ 10 per share

Premium @ 10% = 10,000 × 10 × \(\frac{10}{100}\) = ₹ 10,000

So, premium 10,000 shares of ₹ 10 each at 10% = ₹ 10,000

Equity Share capital = No. of equity shares × face value of each share

= 80,000 × ₹ 10

= ₹ 8,00,000

Note: Equity Share capital has no concern with premium or discount amount.

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.

(b) paying dividend to members

(b) paying dividend to members

(a) (i) and (ii) are correct

(d) Reserve capital

(c) Both (i) and (ii) are correct

Registered Capital or Authorised Capital means the maximum limit up to which a company is authorized to raise share capital.

The total capital of a company is divided into equal units of small denomination termed as shares.

Reserve Capital is that part of the subscribed capital which is reserved to be called up only at the time of winding up or liquidation of the company.

Reserve capital represents the portion of subscribed capital that remains uncalled except in case of winding up or at the time of liquidation. As per Section 99 of the Companies Act, 1956, a company can create reserve capital by passing a special resolution.

The amount of capital stated in the memorandum of association at the time of incorporation is referred to as authorised capital. It is the maximum amount of capital that can be issued to the shareholders of a company. It is also known as the registered capital or the nominal capital of the company.

Calls in arrears means the amount not received by the company or not paid by shareholders against the amount called.

1. Incorporation,
2. Separate legal entity,
3. Perpetual existence,
4. Limited liability,
5. Transfer ability of shares,
6. Management and Ownership,
7. Common seal.

Such a company the liability of the members is strictly limited to the extent of the nominal value of shares held by each of them called the company limited by shares.

Private Company: A private company is one which has minimum paid up. Share capital as may be prescribed and which by its Articles of Association.

• Restricts the right to transfer its shares if any.
• Except in the case of one person company limits the number of its numbers excluding its present or part employee members to 200.
  Where shares are held by two or more persons jointly they shall be treated as a single member.
• Prohibits any invitation to the public to subscribe for any securities of the company.
  A private company must have atleast 2 members. The name of a private company ends with the words “Private Limited”.

(c) loam providers of the company

Share is a part of capital of company while debenture is acceptance of the loan.

Distinction Between Shares and Debentures:

(1) On the basis of security:

• Secured,
• Unsecured debenture.

(2) On the basis of registration:

• Registered,
• Bearer debenture.

(3) On the basis of Redemption:

• Redeemable,
• Irredeemable debenture.

(4) On the basis of Payment:

• First,
• Secondary Debenture.

(5) On the basis of Rate of Interest:

• Fixed,
• Zero Interest Debenture.

(6) On the basis of Convertibility:

• Convertible,
• Non-convertible debenture.

Escrow Account: An escrow account is a temporary pass through account hold by a third party during the process of a transaction on between two parties. This is a temporary account as it operates until the completion of a transaction process which is implemented after all the conditions between the buyer and the seller are settled.

Reserve Capital is a part of “Uncalled Capital”.

Uncalled capital means amount of share not called from public.

Reserve capital means the part of share which will never be called until winding up of company.

Hence reserve capital is part of uncalled capital.

Securities premium cannot be used as working capital.

According to Section 52 (2) of the Companies Act, 2013, the securities premium can be applied only for the following purposes:

(i) Issuing fully paid bonus shares to the members.

(ii) Writing-off the preliminary expenses of the company.

(iii) Writing-off the expenses on issue of shares, commission paid on any issue of shares or debentures of the company and discount allowed on any issues of shares and debentures.

(iv) Providing for the premium payable on the redemption of redeemable preference shares or debentures of the company.

There are two types of shares viz.

• Equity or Ordinary Shares
• Preference Shares

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.

The full form of SEBI is the Securities Exchange Board of India.

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.

This statement is False.

One of the features of equity shares is the rate of dividend payable on equity shares keeps on changing from one year to another. So, there is no question of guaranteed dividend every year for equity shareholders.

Convertible 

Explanation: Preference shares with the provision of being converted into equity shares after a defined span of time are known as convertible preference shares.

Convertible 

Explanation:

Preference shares with the provision of being converted into equity shares after a defined span of time are known as convertible preference shares.

False

Explanation: The premium received on the issue of debentures represents the excess amount received over and above the face value of the debentures. It is a capital gain for the company. Therefore, it is shown on the Liabilities side of the Balance Sheet under the head "Reserves & Surplus".

The document inviting offers from public to subscribe its share is called prospectus. 

Explanation: A prospectus is used to invite applications from the general public to purchase the shares of a company. It contains information about the company such as names and addresses of the registered office and directors of the company, consent from SEBI, authorised and issued capital etc. On the basis of information contained in a prospectus, the public applies for the shares.

If shares are issued at its face value, it is called as issue at par. 

Explanation: Shares are said to have been issued at par when the face value of a share equals its issue price. On the other hand, if shares are issued at a price below their face value, it is known as issue at discount, whereas if shares are issued at a price that is more than the face value, it is known as issue at premium. For example, if a share is issued at a face value of Rs 10, it is issued at par. If it is issued at Rs 9, then it is issued at a discount of Re 1 and if it is issued at Rs 12, then it is issued at a premium of Rs 2.

When shares are forfeited, share capital account is debited.

Explanation: When the shares are forfeited, share capital account is debited, since the money received on the shares being forfeited is to be cancelled. When money is received on the shares, share capital account is credited. Therefore, on forfeiture, share capital account is debited.

If shares are issued at its face value, it is called as issue at par. 

Explanation: Shares are said to have been issued at par when the face value of a share equals its issue price. On the other hand, if shares are issued at a price below their face value, it is known as issue at discount, whereas if shares are issued at a price that is more than the face value, it is known as issue at premium. For example, if a share is issued at a face value of Rs 10, it is issued at par. If it is issued at Rs 9, then it is issued at a discount of Re 1 and if it is issued at Rs 12, then it is issued at a premium of Rs 2.

Nominal value of shares allotted to the public is called subscribed capital. 

Explanation: Shares applied by the public and allotted to the public by a company are referred to as shares subscribed. Therefore, the nominal value of shares allotted to the public is termed as subscribed capital.

As per section 69 (3) of the Companies Act, 1956, the minimum amount payable on share application should be 5 per cent. 

Explanation: Minimum amount payable on share application should be 5% of the nominal value of the share.

Paid up value of all shares allotted is called subscribed capital. 

Explanation: The part of the issued capital that is subscribed to and paid by the public is called subscribed capital.

Equity Shares 

Explanation: Shares issued with voting rights are termed as equity or ordinary shares. Equity shareholders have residual claims in the earnings of a company. In other words, in the event of liquidation (winding up), equity shareholders are paid after payment to preference shareholders has been made.

Preference Shares 

Explanation: Preference shares are given priority over equity shares regarding the distribution of dividend and repayment of capital at the time of liquidation or winding up of a company. In other words, preference shareholders have the first right (preferential) in the surplus assets or the earnings of a company over equity shareholders.

(c) Share capital A/c

False

Explanation: Issue of debentures at a price more than their face value is known as ‘issue of debentures at a premium’. The amount of a premium so received is credited to the Securities Premium Account.

Those debentures that have an option/right to get converted into shares (either preference share or equity share) after a specified period are known as convertible debentures.

True

Explanation: When debentures are issued at a price less than their face value, it is known as ‘issue of debentures at discount’.

(d) Rs. 2 per share

Debenture interest is a charge against a company’s profit, as it is an expense for the company. It can be paid monthly, quarterly or yearly, as defined in the terms and conditions of the issue.

The debentures that are secured by creating a charge on the assets of a company are known as mortgage debentures. Therefore, they are also known as secured debentures. The charge on the assets can be fixed, i.e. on some particular asset of the company or floating, i.e. on all the assets of the company in general.

Secured debentures

Explanation: Secured debentures are guarded by a charge on the company’s assets. The charge can be fixed or floating. Fixed charge means that they are secured by a particular asset of the company and floating charge means that they are secured by all the assets of the company in general.

Debenture

Explanation: Debentures are debt funds issued in the form of certificates under the common seal of the company. The certificates contain the details about rate of interest for the specified period, repayment of principal and the schedule of interest payments.