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The correct answer is : (c) bad debt

It is a loss to the business arising out of failure of a debtor to pay the dues. It is irrecoverable debt.

It is the amount of cash or value of goods, assets, etc., withdrawn from the business by the owner for the personal use of the owner.

• The Blank transfer means the sale or transfer of securities in which the name of the buyer or transferee is not recorded.
• When a member signs the Instrument of transfer without filling in the name of the transferee and hands it over to the transferee with the share certificate it is called ‘Blank Transfer.
• The blank transfer enables easy to purchase and sale of shares as the blank transfer form can be sold any number of times.
• The intermediate buyers need not pay stamp duty.

The initial public offering is the sale of equity shares to the public first time in order to raise capital. This is the most popular and common method used by companies. The company invites the public to subscribe to its shares by issuing prospects.

The subsequent issue after IPO is called FPO.

Correct option: (b) Initial Public Offer

Correct option: (a) Transfer

(a) Yes. The shareholders are liable to pay ₹ 20 for the shares held by them. When a company demands the shareholder to pay a part or full amount of the balance amount unpaid on shares it is called ‘calls on shares’.

(b) The company will send a ‘Call Letter’ to its shareholders for asking them to pay ₹ 20.

(c) If a shareholder fails to pay call money within the specified time, the company can forfeit the shares.

Transmission of Shares takes place on death, insolvency, or insanity of the members.

(a) Yes. The company should set up an allotment committee as the issue is over-subscribed so the Board has to set up an allotment committee.

(b) The company should inform the applicants through a letter of allotment for allotting shares.

(c) The company should issue share certificates within two months from the date of allotment.

(a) The Company should offer IPO.

(b) The company cannot offer Bonus Shares. Bonus Shares are given out of only accumulated capital or reserves only.

(c) Yes. The company can enter into an Underwriting Agreement. The underwriters assure the company to take up the unsold shares so that company can be able to raise the minimum subscription.

(a) Yes. The company can forfeit the shares of ‘Y’ as he failed to pay calls on shares within a certain period.

(b) The company cannot forfeit the shares of ‘X’ as he paid the full amount of shares. Only partly paid-up shares can be forfeited.

(c) Yes. X can transfer his shares by filling Instrument of transfer.

Correct option: (c) Transmission

The main functions of accounting:

1. Measurement 

2. Forecasting

1. Measurement: The main function of accounting is to keep systematic record of transactions, post them in the ledger and ultimately prepare the final accounts.

2. Forecasting: With the help of the various tools of accounting, future performance and financial position of the business enterprises can be forecasted.

Accounting is the systematic process of identifying, measuring, recording, classifying, summarising, interpreting and communicating financial information.

• Bonus shares are fully paid shares issued free of cost to the existing equity shareholders.
• According to Companies Act 2013, every company has to follow certain provisions to issue Bonus Shares.

Following are the provisions related to Bonus Issue:

• A company can issue Bonus shares only out of 
• Free reserves or 
• Securities Premium Account 
• Capital Redemption Reserve Account
• A company cannot issue Bonus Shares only out of Reserves credited by the Revaluation of Assets.
• It also cannot issue Bonus Shares instead of paying dividends.
• Once the announcement for Bonus Shares is made by the Board of Directors, it cannot be then withdrawn.
• Bonus shares are fully paid up shares.
• Shareholders cannot renounce i.e., give away their Bonus Shares to another person.
• There is no minimum subscription to be collected

• When a company wants to issue further capital it can issue shares to its existing equity shareholders which is called Rights Issue.
• According to the Companies Act 2013 company has to fulfil certain provisions for a making Rights Issue.
• The provisions are

                 (i) Rights shares are sold to the existing shareholders at a price that is lesser than its market price.

                  (ii)  A company has to send ‘Letter of offer’ to the existing shareholders at the time of issuing Right Shares.

                  (iii) The letter of offer shall mention

                       (a) The number of shares offered.

                       (b) The Period of offer i.e., offer is valid for a period not less than fifteen days and not exceeding                               thirty days from the date of offer.

• The letter of offer can be sent by registered post, speed post, courier or through electronic mode.
• If a shareholder does not respond to the Rights Issue offer within a given time, it is implied that he is not interested in the offer and company can offer the unsold shares to new Investors.

As per the companies act, the company should collect a minimum of 25% of the nominal value of shares.

False

Explanation: Receipts and Payments Account is a summary of transactions appearing in the Cash Book. It is prepared by not-for-profit organisations at the end of an accounting year. It is a real account, wherein receipts are recorded on the debit side and payments on the credit side. It usually has an opening balance i.e. cash balance and bank balance.

i. Receipts and Payments Account

ii. Salaries

iii. Stationery

iv. Reliance Industries

v. Net Profit

(a) Minimum subscription 

(b) Application form 

(c) Return of allocation

• Transmission of shares means the transfer of the title of shares by the operation of law.
• When the shares of a member are automatically transferred to another person on the death, insolvency, or insanity of a member it is called Transmission of shares.
• Transmission of shares is an involuntary action.
• There is only one party i.e., a legal heir who indicates the process of transmission.
• The legal heir or official receiver need not pay any consideration for the shares.
• There is no need to submit an Instrument of Transfer of pay stamp duty.

Correct option: (a) Book Building

Sweat equity shares are issued to directors or employees of the company.

When a company offers its securities to a select group of persons not exceeding 200, it is called Private Placement.

The prospectus should be filed with the Registrar of Companies before issuing it to the public.

• The method of offering shares by providing a price range is called the book building method.
• In the book, building method shares will be sold by the bidding process.
• The company issues a Red Herring Prospectus which contains a price range or price band and as the investor to bid on it.
• In this method, the company doesn’t fix up a particular price for the share but gives a price range e.g., ₹ 80 to ₹ 100.
• When bidding for the shares, investors have to decide at which price they would like to bid for the shares e.g. ₹ 80, ₹ 90, ₹ 100.
• The lower price band (₹ 80) is known as the floor price and the highest price band (₹ 100) is known as the cap price. The final price at which shares are offered to investors is called the cut-off price.
• Board on the demand and supply of the shares, decides the final price is to be fixed.
• Investors can bid on any number of shares that they are willing to buy at a given price band. Such Bidding is kept open for 5 days.
• The bids with application money are to be submitted to the Lead Merchant Bankers called ‘Book Runners’ who enter the bids in a book.
• After bidding, the company fixes a cutoff price at which shares on offer can be sold.
• The company issues a prospectus that contains the final price.
• Book Building method is used for public issues i.e., IPO and FPO.

Every company issuing shares has to follow rules or general principles given by the Companies Act 2013 as follows:

• Proper Authority: The Board of Directors or the allotment committee set up by the Board has the authority to allot shares.
• Allotment must be against application only: A Company can allot shares only if it has received a written application for shares from the applicant. Allotment of shares cannot take place on the basis of an oral request.
• Reasonable time: As per the Act, allotment shall be done within 60 days of receipt of application money. Allotment can be made from the fifth day from the date of issue of prospectus.
• Absolute and Unconditional allotment: Shares should be allotted on the same terms as stated in the prospectus and application form. No change in terms of allotment or new conditions can be added at the time of allotment.
• Communication: Company has to inform the applicant that shares have been allotted, to him by sending a letter of allotment or allotment advice. The letter gives details of a number of shares allotted amount of Allotment money to be paid etc.
• Allotment should not be in Contravention (Violation) of any other laws: A company cannot allot shares by violating or contradicting any other existing laws e.g., shares cannot be allotted to a minor, of a country where a company operates its business.

A Share certificate refers to documents that are issued by a company evidencing that a person named in such certificate is the owner of the shares of the company stated in the share certificate. Share certificate has to be issued under the common seal of the company. It should be issued within 2 months from the date of allotment against the allotment letter.

• Bonus Shares are shares distributed by a company to its current shareholders as fully paid shares free of charge.
• The Bonus Shares are given to the existing equity shareholders according to their existing proportion of equity shareholdings.

The company can issue Bonus Shares to its existing equity shares.

Share Certificate is a registered document issued by a company that is evidence of ownership of a specified number of shares of the company.

• Allotment means the distribution of shares among the applicants. It means giving shares to share applicants of to specific persons with whom the company has entered into the contract.
• Allotment of shares is a procedure in which shares are distributed to those applicants who have submitted a written application along with the application money.

Correct option: (a) existing Equity shareholders

• This means the voluntary return of shares by the member to the company for cancellation.
• Surrender of shares is allowed only if there is no other option but to forfeit the shares.
• Only partly paid-up shares can be surrendered.
• Surrendered shares can be surrendered when a company provides for such surrender of shares.

An employee stock option plan is an employee benefits scheme under which the company encourages its employees to acquire ownership in the form of shares. Under this scheme, permanent employees, Directors or Officers of the Company or its holding company or subsidiary company are offered the benefit or right to purchase the equity shares of the company at a future date at a predetermined price.

• The Authorized capital is the maximum amount of capital that a company can raise through the issue of shares to the shareholders.
• The Authorized capital of a company is also called Registered Capital or Nominal Capital.
• Authorized capital is the maximum capital that is authorized by the company’s memorandum of Association.

Correct option: (a) Private Placement

In a partnership firm every partner is the principal as well as the agent. 

Explanation: 

In a partnership firm, every partner is the principal as well as the agent. It means that any partner can enter into a contract with other firms by himself (as the principal), without discussing it with other partners (acting as an agent on behalf of others).

A partner who gave his name to partnership firm- nominal partner. 

Explanation: 

A nominal partner is the one who only lends his name to the business. He neither contributes capital nor shares the profits or losses of the business.

False

Explanation: Charitable institutions are not-for-profit organisations. So, these organisations prepare Income and Expenditure Account, rather than Profit and Loss Account, which is prepared by profit-making organisations.

Because the objective of such activities is not profit. The activity can be called partnership only if the objective behind it is to earn profit.

In a co-operative society the principle followed is one man one vote. 

Explanation: 

“One man, one vote” means that equal voting rights are given to all members of a co-operative society. Hence, there exists a democratic style of management in a co-operative society.

A co-operative society works on the principle of ‘No progress without co-operation’ and philosophy of each for all and all for each.