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This section includes InterviewSolutions, each offering curated multiple-choice questions to sharpen your knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
Rajan Ltd. purchased assets from Geeta & Co. for Rs. 5,00,000 . A sum of Rs. 1,00,000 was paid by means of a bank draft and for the balance due Rajan Ltd. Issued Equity Shares of Rs. 10 each at a premium of 25%. ltbr. Journalise the above transactions in the books of the company. |
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Answer» Correct Answer - 32,000 Equity Shares to be issued. |
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| 2. |
Z Ltd. purchased furniture costing Rs. 2,20,000 from C.D Ltd. The payment was to be made by issue of 9% Preference Shares of Rs. 100 each at a premium of Rs. 10 per share. Pass necessary Journal entries in the books of Z Ltd. |
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Answer» Correct Answer - 2,000; 9% Preference Shares to be issued. |
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| 3. |
State the name of capital which refers to that amount which is stated in the Memorandum of Association as the share capital of the company. |
| Answer» Authorised or Registered Capital | |
| 4. |
State any one purpose for which Securities Premium Reserve Account can be utilised. |
| Answer» Securities Premium Reserve Account can be used for writing off any preliminary expenses of the company. To write off expenses of issue of shares and debentures, such as commission paid or discount given on the issue of shares. | |
| 5. |
what is meant by public subscription of shares? |
| Answer» Under Subscription of shares. A company offers shares to the public inviting applications for their subscription. When the number of shares applied for by the public is less than the number of shares issued by the company, it is a situation of under-subscription. On the other hand, the number of shares applied for by the public is more than the number of shares issued by the company, it is a situation of over-subscription. | |
| 6. |
Zee Ltd. intends to issue 10,00,000 Equity Shares of Rs. 10 each to public for subscription. The management was suggested by the accountant Rahul that shares should be issued at 10% discount so that shares are subscribed in full. The management did not accept the suggestion of Rahul. What must be the reason for not accepting the suggestion? |
| Answer» The reason for not accepting the suggestion of accountant Rahul must have been that Section 53 of the Companies Act, 2013 does not permit issue of shares at discount. | |
| 7. |
Give the meaning of Call-in-Arrears. |
| Answer» When a company calls for an unpaid amount of shares it has issued and an investor fails to pay the amount fully or partially, then it is known as call in arrears. | |
| 8. |
Exe Ltd. has Rs. 10,000 debit balance in Calls-in-Arrears Account and also Rs. 10,000 credit balance in Calls-in-Advance Account. The Accountant did not show both the accounts in Balance Sheet adjusting the two accounts against each other. Is the approach correct? Give your reasons. |
| Answer» No, the approach is not correct because the two items are separate. Call-in-Arrears is shown by way of deduction from the Called-up Share Capital whereas Calls-in-Advance is shown as Current Liability. | |
| 9. |
The Director of a company foreited 300 shares of Rs. 10 each issued at a premium of Rs. 3 per share, for the non-payment of the first call money of Rs. 2 per share. The final call of Rs. 2 per share has not been made. Half the forfeited shares were reissued at Rs. 1,500 as fully paid-up. Record the Journal entries for the forfeiture and reissue of shares. |
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Answer» Correct Answer - Capital Reserve-Rs. 900. |
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| 10. |
How is Call-in-Arrears shown in the Balance Sheet? |
| Answer» We show the Calls-in-Arrears Account in the Notes to Accounts on Share Capital to the Balance Sheet as a deduction from the amount of ‘Subscribed but not fully paid-up’ under ‘Subscribed Capital’. | |
| 11. |
A Ltd. invited applications for issuing 1,00,000 shares of Rs. 10 each at a premium of Rs. 1 per share. The amount was payable as follows: `{:("On Application",-,"Rs. 3 per share,"),("On Allotment",-,"Rs. 3 per share(including premium),"),("On First Call",-,"Rs. 3 per share,"),("On Second and Final Call",-,"Balance".),(,,):}` Applications for 1,60,000 shares were received. Allotment was made on the following basis, `{:("(i) To applicants for 90,000 shares",-,"40,000 shares,"),("(ii) To applicants for 50,000 shares",-,"40,000 shares,"),("(iii) To applicants for 20,000 shares",-,"Full shares."):}` Excess money paid on application is to be adjusted against the amount due on allotment and calls. Rishabh, a shareholder, who applied for 1,500 shares and belonged to category (ii), did not pay allotment, first and second and final call money. Another shareholder, Sudha , who applied for 1,800 shares and belonged to category (i), did not pay the first and second and final call money. All the shares of Rishabh and Sudha were forfeited and were subsequently reissued at Rs. 7 per share fully paid. Pass the necessary Journal entries in the books of A Ltd. Open Call-in-Arrears Account and Call-in-Advance Account wherever required . |
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Answer» Correct Answer - Capital Reserve-Rs. 3,100. |
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| 12. |
What is Call-in-Advance? |
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Answer» If a company accepts the amount against the call or calls which are not made yet, the amount so received in advance is called Calls-In-Advance. It may also happen in case of partial or pro-rata allotment of shares when the company retains excess amount received on the application of shares beyond the allotment money. |
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| 13. |
Ghosh Ltd. made the second and final call on its 50,000 Equity Shares @ Rs. 2 per share on 1st January,2016. The entire amount was received on 15th January, 2016 except on 100 shares allotted to Venkat. Pass necessary journal entries for the call money due and received by opening Call-in-Arrears Account. |
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Answer» (i) Dr. Equity Shares Second and Final Call A/c and Cr. Equity Share Capital A/c by Rs. 1,00,000. (ii) Dr. Bank A/c by Rs. 99,800 and Call-in-Arrears A/c by Rs. 200, Cr. Equity Shares Second and Final Call A/c by Rs. 1,00,000. |
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| 14. |
On 28-2-2016 the first call of Rs. 2 per share became due on 50,000 equity shares allotted by Kumar Ltd. Komal, a holder of 1,000 shares, did not pay the first cal money. Kovil, a holder of 750 shares, paid the second and final call of Rs. 4 pershare alongwith the first call. Pass necessary Journal entry for the amount received by opening call-in-arrear and calls-in-advance accounts in the books of the company. |
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Answer» Correct Answer - Dr. Bank A/c-Rs. 1,01,000 and Calls-in-Arrears A/c-Rs. 2,000; Cr. Equity Shares First Call A/c-Rs. 1,00,000 and Call-in-Advance A/c-Rs. 3,000. |
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| 15. |
Pass Journal entries in the following cases: M Ltd. forfeited 200 Equity Shares of Rs. 10 each, issued at a premium of Rs. 5 per share, held by Ram for non-payment of the final call of Rs. 3 per share. Of these, 100 shares were reissued to Vishu at a discount of Rs. 4 per share. |
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Answer» Correct Answer - Capital Reserve-Rs. 300. |
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| 16. |
Give necessary Journal entries: (i) The Directors of Devendra Ltd. Resolved on 1st January, 2010 that 100 Equity Shares of Rs. 10 each, Rs. 8 paid-up be forfeited for non-payment of final call of Rs. 2. On 1st February, 60 of these shares were reissued @ Rs. 7 per share as fully paid-up. (ii) Virender Limited forfeited 20 shares of Rs. 100 each (Rs. 60 called-up) issued at par to Mukesh on which he had paid Rs. 20 per share. Out of these, 15 shares were reissued to Sanjeev as Rs. 60 paid-up for Rs. 45 per share. |
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Answer» Correct Answer - (i) Capital Reserve-Rs. 300. (ii) Capital Reserve-Rs. 75. |
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| 17. |
Star Ltd. forfeited 500 Equity shares of Rs. 100 each for non-payment of first call of Rs. 30 per share. The final call of Rs. 10 per share was not yet made. Out of these, 60% shares were reissued for Rs. 39,000 fully paid. Journalise the forfeitue and reissue of shares. |
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Answer» Correct Answer - Capital Reserve-Rs. 18,000. |
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| 18. |
Y Ltd. forfeited 100 equity shares of Rs. 10 each for non-payment of first call of Rs. 2 per share. The final call of Rs. 2 per share was yet to be made. Calculate the maximum amount of discount at which these shares can be reissued. |
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Answer» Correct Answer - Rs. 6 per share |
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| 19. |
Jeevan Dhara Ltd. invited appliations for issuing 1,20,000 equity shares of Rs. 10 each at a premium of Rs. 2 per share. The amount was payable as follows: `{:("On application",-,"Rs. 2 per share,"),("On allotment",-,"Rs. 5 per share (Including premium), "),("On first and final call",-,"Balance."):}` Application for 1,50,000 shares were received. Shares were allotted to all the applications on pro rata basis. Excess money received on applications was adjusted towards sums due on allotment. All calls were made. Manu who had applied for 3,000 shares failed to pay the amount due on allotment and first and final call. Madhur who was allotted 2,400 shares failed to pay the first and final call. Shares of both Manu and Madhur were forfeited. The forfeited shares were reissued at Rs. 9 per share as fully paid-up. Pass necessary Journal entries for the above transactions in the books of Jeevan Dhara Ltd. |
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Answer» Correct Answer - Capital Reserve-Rs. 13,200. |
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| 20. |
The Directors of M Ltd. resolved on 1st May, 2015 that 2,000 Equity Shares of Rs. 10 each, Rs. 7.50 paid be forfeited for non-payment of final call of Rs. 2.50 . On 10th June, 2015, 1,800 of these shares were reissued for Rs. 6 per share. Give necessary Journal entries. |
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Answer» Correct Answer - Capital Reserve-Rs. 6,300. |
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| 21. |
A company invited applications for 30,000 Equity Shares of Rs. 10 each at a premium of Rs. 2 each. The total application money received @ Rs. 2 per share was Rs. 72,000 . Name the kind of subscription . List the three alternatives for allotting these shares. |
| Answer» The public issue has been oversubscribed. | |
| 22. |
Super Star Ltd. makes an issue of 10,000 Equity Shares of Rs. 100 each, payable as: `{:("On application and allotment"," Rs. 50 per share,"),("On first call"," Rs. 25 per share,"),("On second and final call"," Rs. 25 per share."),(,):}` Members holding 400 shares did not pay the second and final call and the shares are duly forfeited, 200 of which are reissued as fully paid-up @ Rs. 50 per share. Pass Journal entries in the books of the company. |
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Answer» Correct Answer - Capital Reserve-Rs. 5,000. |
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| 23. |
The Hindustan Manufacturing Ltd. had a total subscribed capital of Rs. 10,00,000 in Equity Shares of Rs. 10 each of which Rs. 7.50 were called-up . A final call of Rs. 2.50 was made and all amount paid except two calls of Rs.2.50 each in respect of 100 shares held by D. These shares were forfeited and reissued at Rs. 8 per share. Pass necessary Journal entries (including that of cash) to record the transactions of final call, forfeiture of shares and reissue of forfeited shares. Also, prepare the Balance Sheet of the company. |
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Answer» Correct Answer - Capital Reserve-Rs. 300; Balance Sheet Total-Rs. 10,00,300. |
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| 24. |
The Directors of Super Star Ltd. invited applications for 2,00,000 Equity Shares of Rs. 10 each to be issued at 20% premium . The money payable per shares was: on application Rs. 5, on allotment Rs. 4 (including premium of Rs. 2 ), first call Rs. 2 and final call Rs. 1. Application were received for 2,40,000 shares and allotment was made as: (i) to applicants for 1,00,000 shares-in full, (ii) to applicants for 80,000 shares-60,000 shares , (iii) to applicants for 60,000 shares-40,000 shares. Applicants of 1,000 shares falling in Category (i) and applicants of 1,200 shares falling iin Category (ii) failed to pay allotment money. These shares were forfeited on failure to pay first call. Holders of 1,200 shares falling in Category (iii) failed to pay the first and final call and these shares were forfeited after final call. 1,300 shares [1,000 of Category (i) and 300 of Category (ii)] were reissued at Rs. 8 per share as fully paid-up. Journalise the above transactions. Prepare Cash Book and Balance Sheet . |
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Answer» Correct Answer - Amount forfeited-Rs. 11,000 (for Categories `i` and ii ) + Rs. 8,400 (Category iii) = Rs. 19,400; Amount transferred to Capital Reserve-Rs. 4,400; Actual amount received on allotment-Rs. 5,93,900; Securities Premium Reserve-Rs. 3,96,200; paid-up capital-Rs. 19,94,400; Balance Sheet Total-Rs. 23,95,000. |
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| 25. |
Sunshine Ltd. issued 20,000 shares of Rs. 100 each payable Rs. 25 per share on application, Rs. 25 per share on allotment and the balance in two calls of Rs. 25 each. The company did not make the final call of Rs. 25 per share. All the money was duly received with the exception of the amount due on the first call on 400 shares held by Mr. Modi. The Board of Directors forfeited these shares and subsequently reissued them @ Rs. 75 per share paid-up for a sum of Rs. 28,000. Journalise the above transactions and prepare Share Capital Account. |
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Answer» Correct Answer - Capital Reserve-Rs. 18,000. |
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| 26. |
The Kalyan Cotton Mills Ltd. was registered on 1st January, 2011 with a capital of Rs. 10,00,000 divided into 1,00,000 shares of Rs. 10 each . The company issued 42,000 shares of which 40,000 shares were taken up by the public and Rs. 1 per share was received with application. On 1st February, these shares were allotted and Rs. 2 per share was duly received on 28th February as allotment money. A first call of Rs. 3 per share was made on 1st March and the call money on all shares with the exception of 100 shares was received. The final call of Rs. 4 per share was made on 1st june and the amount due, with the exception of 400 shares, was received by 30th June. Pass necessary Journal and Cash Book entries and prepare the Balance Sheet as at 30th June, 2011. |
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Answer» Correct Answer - Balance Sheet Total-Rs. 3,98,100. |
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| 27. |
What is meant by pro rata allotment of shares? |
| Answer» Pro-rata allotment refers to the allotment of shares in proportion of the shares applied for. When a company makes pro-rata allotment, it adjusts the excess money received at the time of application firstly, towards the allotment and then towards calls. | |
| 28. |
U.P. Sugar Works Ltd. was registered on 1st January, 2019 with an authorised capital of Rs. 15,00,000 divided into 15,000 shares of Rs. 100 each. The company issued on 1st April, 2019, 5,000 shares of Rs. 100 each at a premium of Rs. 5 per share payable Rs. 25 per share on application, Rs. 30 (including premium) on allotment and the balance in two equal instalments of Rs. 25 per each on 1st July and 1st October respectively . All the allotment and call moneys were paid when due, except in case of one shareholder who failed to pay the final call on 100 shares held by him . His shares were forfeited on 1st November after giving him a due notice. Show necessary entries in the books of the company to record these transactions . |
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Answer» Correct Answer - Forfeited Shares A/c-Rs. 7,500. |
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| 29. |
A company issued 10,000 shares of the value of Rs. 10 each, payable Rs. 3 on application, Rs. 3 on allotment and Rs. 4 on the first and final call. All amounts are duly received except the call money on 100 shares. These shares are subsequently forfeited by Directors and are resold as fully paid-up for Rs. 500. Give necessary Journal entries for the transactions. |
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Answer» Correct Answer - Capital Reserve-Rs. 100. |
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| 30. |
Black Stone Ltd. issued 10,000 Equity Shares of Rs. 10 each at a premium of Rs. 3 per share payable Rs. 5 on application, Rs. 5 (including premium) on allotment and the balance on first call. All the shares offered were applied for and allotted. All the money due on allotment was received except on 200 shares. Call was made. All the amount due thereon was received except on 300 shares. Directors forfeited 200 shares on which both allotment and call money were not received. Pass necessary Journal entries to record the above. |
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Answer» Correct Answer - Forfeited Shares A/c-Rs. 1,000. |
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| 31. |
Ankit Ltd. issued 20,000 equity shares of Rs. 10 each at a premium of Rs. 2 per share, payable as: `{:("On Application",:,"Rs. 3"),("On Allotment",:,"Rs. 5 (including premium)"),("On First Call",:,"Rs. 2"),("On Second and Final Call",:,"Rs. 2"),(,,):}` Vijay was allotted 500 shares. Pass the necessary Journal entries relating to the forfeiture of shares in following cases. Case I Vijay did not pay allotment money and his shares were immediately forfeited. Case II Vijay did not pay allotment and first call, his shares were forfeited after first call. Case III Vijay failed to pay first call and his shares were forfeited immediately. Case IV Vijay failed to pay both the calls and his shares were forfeited. |
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Answer» Case I Dr. Share Capital A/c-Rs. 3,000 and Securities Premium Reserve A/c-Rs.1,000, Cr. Forfeited Shares A/c-Rs. 1,500 and Shares Allotment A/c-Rs. 2,500. Case II Dr. Share Capital A/c-Rs. 4,000 Securities Premium Reserve A/c-Rs. 1,000, Cr. Forfeited Shares A/c-Rs. 1,500, Shares Allotment A/c-Rs. 2,500 and Shares First Call A/c-Rs. 1,000. Case III Dr. Share Capital A/c-Rs. 4,000, Cr. Forfeited Shares A/c-Rs. 3,000 and Shares First Call A/c-Rs. 1,000. Case IV Dr. Share Capital A/c-Rs. 5,000, Cr. Forfeited Shares A/c-Rs. 3,000 and Shares Call A/c-Rs. 1,000 and Shares Second and Final Call A/c-Rs. 1,000. |
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| 32. |
150 shares of Rs. 10 each issued at a premium of Rs. 4 per share payable with allotment were forfeited for non-payment of allotment money of Rs. 8 per share including premium. The first and final call of Rs. 4 per share was not made. The forfeited shares were reissued at Rs. 15 per share fully paid-up. Pass Journal entries in the books of X Ltd. for the above. |
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Answer» Correct Answer - Capital Reserve-Rs. 300. |
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| 33. |
Gaurav applied for 5,000 shares of Rs. 10 each at a premium of 2.50 per share. But he was allotted only 2,500 shares on pro rata basis. After having paid Rs. 3 per share on application, he did not pay allotment money of Rs. 4.50 pe share (including premium) and on his subsequent failure to pay the first call of Rs. 2 per share, his shares were forfeited . These shares were reissued at the rate of Rs. 8 per share credited as fully paid. Pass Journal entries to record the forfeiture and reissue of shares. |
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Answer» Correct Answer - Allotment money due but not received-Rs. 3,750; Forfeited Shares A/c Credited-Rs. 12,500; Capital Reserve-Rs. 7,500. |
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| 34. |
Commerce Publications Ltd. issued 50,000 Equity Shares of Rs. 10 each at a premium of 10% payable as under: `{:("On application","Rs. 2,","On first call","Rs. 2,"),("On allotment","Rs. 5,","On final call","Rs. 2."):}` The calls were made by the company and all the money was duly received except the allotment and call money on 500 shares. These shares were, therefore, forfeited and later reissued @ Rs. 9 per shares as fully paid-up. Pass necessary Journal entries to record the above transactions . |
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Answer» Correct Answer - Capital Reserve-Rs. 500. |
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| 35. |
Eastern Company Limited, having an authorised capital of Rs. 10,00,000 divided into shares of Rs. 10 each, issued 50,000 shares at a premium of Rs. 3 per share payable as follows: `{:("On Application ",,"Rs. 3 per share,"),("On Allotment (including premium)",,"Rs. 5 per share,"),("On first call (due three months after allotment)",,"Rs. 3 per share,"),("and the balance as and when required.",,):}` Applications were received for 60,000 shares and the directors allotted the shares as follows: (i) Applicants for 40,000 shares received in full. (ii) Applicants for 15,000 shares received and allotment of 8,000 shares. (iii) Applicants for 5,000 shares received 2,000 shares on allotment excess money being returned. All amounts due on allotment were received. The first call was made and the money was received except on 100 shares. Give Journal and cash book entries to record these transactions of the company. Also prepare the Balance Sheet of the company. |
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Answer» Correct Answer - Balance Sheet Total-Rs. 5,49,700. |
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| 36. |
Slow & Steady Ltd. invited applications for 10,000 Equity Shares of Rs. 10 each for public subscription. The amount of these shares was payable as: On application Rs. 1 per share, on allotment Rs. 2 per share, on first call Rs. 3 per share and on second and final call Rs. 4 per share. All sums payable on application, allotment and call were duly received with the following exceptions: (i) A, who held 200 shares, failed to pay the money on allotment and calls. (ii) B, to whom 150 shares were allotted , failed to pay the money on first call and final call. (iii) C, who held 50 shares, did not pay the amount of second and final call. The shares of A , B and C were forfeited and were subsequently reissued for cash as fully paid-up at a discount of 5%. Pass necessary Journal entries to record these transactions in the books of X Ltd. |
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Answer» Correct Answer - Capital Reserve-Rs. 750. |
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| 37. |
X Ltd. was formed with a capital of Rs. 10,000 divided into shares of Rs. 10 each. It offered 90% shares for subscription. 40% payable on application, 25% payable on allotment and the balance on final call. The applicants paid Rs. 3,60,000 on application and Rs. 1,69,000 on allotment. Final call had not yet been made. Calculate: (a) Authorised Capital, (b) Issued Capital, (c) Subscribed Capital, (d) Called-up Capital, (e) Paid-up Capital, (f) Calls-in-Arrears. |
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Answer» Calculation of Various Capitals: (a) Authorised Capital=Rs. 10,00,000. (b) Issued Capital=Rs. 9,00,000 (i.e., 90% of Rs. 10,00,000). (c) Subscribed Capital=Rs. 9,00,000. (d) Called-up Capital=Rs. 5,85,000(i.e., 65% of Rs. 9,00,000). (e) Paid-up Capital=Rs. 5,29,000 (i.e., Rs. 3,60,000 + Rs. 1,69,000). (f) Calls-in Arrears =Rs. 56,000 (i.e., Rs. 5,85,000-Rs. 5,29,000). |
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| 38. |
Sona Ltd. purchased machinery costing Rs. 17,00,000 from Mona Ltd. Sona Ltd. Paid 20% of the amount by cheque and for the balance amount issued Equity Shares of Rs. 100 each at a premium of 25%. Pass necessary Journal entries for the above transactions in the books of Sona Ltd. Show your working notes clearly . |
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Answer» Correct Answer - 10,880 Equity Shares to be issued. |
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| 39. |
Define a Company. |
| Answer» The Companies Act 2013 of India defines a company as-"A registered association which is an artificial legal person, having an independent legal, entity with a perpetual succession, a common seal for its signatures, a common capital comprised of transferable shares and carrying limited liability." | |
| 40. |
What are the essential characteristics of a company ? |
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Answer» Characteristics Of A Company 1) Incorporated association : A company comes into existence when it is registered under the Companies Act (or other equivalent act under the law). A company has to fulfill requirements in terms of documents (MOA, AOA), shareholders, directors, and share capital to be deemed as a legal association. 2) Artificial Legal Person : In the eyes of the law, A company is an artificial legal person which has the rights to acquire or dispose of any property, to enter into contracts in its own name, and to sue and be sued by others. 3) Separate Legal Entity : A company has a distinct entity and is independent of its members or people controlling it. A separate legal entity means that only the company is responsible to repay creditors and to get sued for its deeds. The individual members cannot be sued for actions performed by the company. Similarly, the company is not liable to pay personal debts of the members. 4) Perpetual Existence: Unlike other non-registered business entities, a company is a stable business organisation. Its life doesn’t depend on the life of its shareholders, directors, or employees. Members may come and go but the company goes on forever. 5) Common Seal : A company being an artificial legal person, uses its common seal (with the name of the company engraved on it) as a substitute for its signature. Any document bearing the common seal of the company will be legally binding on the company. 6) Limited Liability: A company may be limited by guarantee or limited by shares. In a company limited by shares, the liability of the shareholders is limited to the unpaid value of their shares. In a company limited by guarantee, the liability of the members is limited to the amount they had agreed upon to contribute to the assets of the company in the event of it being wound up. |
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| 41. |
What is meant by Subscribed Capital? |
| Answer» Subscribed shares capital are shares that investors have promised to buy. These shares are usually subscribed as part of an initial public offering (IPO). | |
| 42. |
Give the definition of a Share. |
| Answer» “A share is the interest of the shareholder in the company. It is measured by the sum of money for the purpose of liability in the first place and of interest in the second place” | |
| 43. |
What is meant by Issued Capital? |
| Answer» Issued share capital is simply the monetary value of the shares of stock a company actually offers for sale to investors. The number of issued shares generally corresponds to the amount of subscribed share capital, though neither amount can exceed the authorized amount. | |
| 44. |
Explain the term Preference Share. |
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Answer» Preference shares are those shares which carry certain special or priority rights. Firstly, dividend at a fixed rate is payable on these shares before any dividend is paid on equity shares. Secondly, at the time of winding up of the company, capital is repaid to preference shareholders prior to the return of equity capital. |
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| 45. |
What is meant by Authorised Capital ? |
| Answer» Authorized share capital is the number of stock units (shares) that a company can issue as stated in its memorandum of association or its articles of incorporation. Authorized share capital is often not fully used by management in order to leave room for future issuance of additional stock in case the company needs to raise capital quickly. | |
| 46. |
What is meant by Cumulative Preference Share? |
| Answer» Cumulative preference shares - In this type of preference share, dividends were paid also for those years in which no profit is earned. Whenever, the company declares profits, the cumulative preference shares are paid dividend for all the previous years in which dividend could not be declared. | |
| 47. |
Guru Ltd. invited applications for 5,00,000 Equity Shares of Rs. 10 each at a premium of Rs. 5 per share. Because of favourable market conditions, the issue was oversubscribed and applications for 15,00,000 shares were received. Suggest the alternatives available to the Board of Directors for the allotment of shares. |
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Answer» Alternatives available to the Board if Directors of Guru Ltd. are : (i) Excess applications may be rejected and shares may be allotted to the remaining applicants in full. (ii) Shares may be allotted to all the applicants on pro rata basis. (iii) Some applications may be rejected , some applications may be allotted in full and shares may be allotted on pro rata basis to the remaining applicants. |
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| 48. |
What amount of profit on reissue will be transferred to Capital Reserve under following situations? (i) 3,000 shares of Rs. 10 each of Rakesh were forfeited by crediting Rs. 5,000 to Forfeited Shares Accounts. Out of these, 1,800 shares were reissued to Mohan for Rs. 9 per share as fully paid-up. (ii) Z Ltd. forfeited 20 shares of Rs. 100 each (Rs. 60 called-up) issued at par to Shiv on which he paid Rs. 20 per share. Out of these, 15 shares were reissued to Rajesh as Rs. 60 paid-up for Rs. 45 per share. |
| Answer» (i) Rs. 1,200 (ii) Rs. 75. | |