Chapter MCQ Test 2 — Company Accounts: Accounting for Share Capital
10 Questions • 12 min • Chapter MCQ
12:00
Question 1 of 10
A company issues 10,000 shares but receives applications for 15,000 and makes a pro-rata allotment to all. The excess application money is:
Adjusted towards allotment due
Always refunded fully
Treated as premium
Forfeited
Explanation: In a pro-rata allotment the surplus application money is carried forward to adjust against allotment (and later calls).
Question 2 of 10
A Rs 10 share (premium Rs 2 on allotment) is forfeited after the holder paid application Rs 3 only; allotment Rs 6 (incl. premium) unpaid. On forfeiture, Securities Premium Reserve is:
Debited (cancelled), as the premium was never received
Credited
Untouched
Transferred to Capital Reserve
Explanation: Premium not yet received must be reversed/cancelled on forfeiture; only premium actually received stays credited.
Question 3 of 10
1,000 shares of Rs 10 are forfeited after Rs 5 per share had been received; they are re-issued as fully paid for Rs 7 each. The Capital Reserve created is:
Rs 2,000
Rs 5,000
Rs 4,000
Rs 3,000
Explanation: Forfeited amount Rs 5,000 (5 × 1,000); re-issue discount = (10 − 7) × 1,000 = Rs 3,000; Capital Reserve = 5,000 − 3,000 = Rs 2,000.
Question 4 of 10
Why is securities premium NOT available for paying ordinary cash dividends?
It is a capital receipt restricted by Section 52 to specified uses
It is an expense
It belongs to creditors
It is a loss
Explanation: Premium is a capital reserve usable only for the purposes listed in Section 52, not for distributing dividends.
Question 5 of 10
Calls-in-advance, under Table F, may carry interest payable by the company up to:
12% p.a.
6% p.a.
10% p.a.
Nil
Explanation: The company may pay up to 12% p.a. on calls-in-advance (and charge up to 10% on calls-in-arrears).
Question 6 of 10
On forfeiture of shares originally issued at par, the Share Capital Account is debited with the:
Called-up amount per share × number forfeited
Amount received only
Face value plus premium
Market price
Explanation: Share Capital is debited with the called-up value of the forfeited shares; amount received is moved to Forfeited Shares A/c.
Question 7 of 10
Authorised, issued, subscribed, called-up and paid-up capital are related as:
Authorised ≥ Issued ≥ Subscribed ≥ Called-up ≥ Paid-up
Paid-up ≥ Authorised
Issued ≥ Authorised
All equal always
Explanation: Each layer is a subset of the one before it.
Question 8 of 10
A shareholder holding 100 shares (Rs 10, Rs 7 called) has not paid the Rs 3 first call. Calls-in-arrears shown is:
Rs 300
Rs 700
Rs 1,000
Rs 100
Explanation: Unpaid call = 100 × Rs 3 = Rs 300, deducted from called-up capital.
Question 9 of 10
Maximum a company can normally allot is its:
Issued capital
Subscribed applications
Authorised capital exactly
Paid-up capital
Explanation: It cannot allot more shares than it issued, however many apply.
Question 10 of 10
The Forfeited Shares Account balance before re-issue represents:
Money already received on the forfeited shares, held in suspense
A loss
Unpaid calls
Dividend payable
Explanation: It holds the amount the company kept from the defaulting holder, pending re-issue adjustments.