Chapter Exam

Chapter 5: Accounting for Share Capital — Online MCQ Test

Q: Which type of shares carry voting rights and receive dividend only after preference shareholders are paid?

Answer: A. Equity shares — Equity shareholders are the real owners of the company and usually carry voting rights. They receive dividend after preference shareholders.

Q: The maximum amount of share capital that a company is authorised to issue by its Memorandum of Association is called:

Answer: C. Authorised capital — Authorised capital is the maximum capital mentioned in the Memorandum of Association. A company cannot issue shares beyond this limit unless it alters its memorandum.

Q: Securities Premium Reserve may be used for which of the following purposes?

Answer: B. Writing off preliminary expenses — As per the Companies Act, Securities Premium Reserve can be used for specific purposes such as writing off preliminary expenses. It cannot be freely distributed as dividend.

Q: When shares are issued at a premium and the premium is due with allotment money, which account is credited for the premium amount?

Answer: B. Securities Premium Reserve Account — Premium received or due on issue of shares is credited to Securities Premium Reserve Account. Share Capital Account is credited only with the nominal value.

Q: A company issued 10,000 shares and received applications for 12,000 shares. Applications for 2,000 shares were rejected. If application money was ₹3 per share, what amount will be refunded?

Answer: B. ₹6,000 — Refund is made only for rejected applications. Amount refunded = 2,000 shares × ₹3 = ₹6,000.

Q: A company forfeited 1,000 shares of ₹10 each, ₹8 called-up. The shareholder had paid ₹5 per share. These shares were reissued as ₹8 paid-up for ₹7 per share. What amount will be transferred to Capital Reserve?

Answer: B. ₹4,000 — Amount forfeited = 1,000 × ₹5 = ₹5,000. Discount on reissue = 1,000 × ₹1 = ₹1,000, so Capital Reserve = ₹5,000 - ₹1,000 = ₹4,000.

Q: A company issued 20,000 shares payable ₹2 on application, ₹3 on allotment and ₹5 on first and final call. Applications were received for 30,000 shares; 5,000 applications were rejected and the remaining were allotted pro rata. Mohan applied for 500 shares. How much allotment money will Mohan pay?

Answer: B. ₹1,000 — Mohan is allotted 500 × 20,000/25,000 = 400 shares. Allotment due = 400 × ₹3 = ₹1,200; excess application money = 100 × ₹2 = ₹200, so amount payable = ₹1,000.

Q: A company issued shares payable ₹2 on application, ₹3 on allotment and ₹5 on call. After rejecting some applications, the remaining applicants were allotted shares in the ratio of 2 shares for every 3 shares applied. A shareholder applied for 900 shares and failed to pay allotment and call money. What amount will be shown as calls in arrears for this shareholder?

Answer: C. ₹4,200 — He is allotted 900 × 2/3 = 600 shares. Excess application money = 300 × ₹2 = ₹600; allotment due = 600 × ₹3 = ₹1,800, so unpaid allotment = ₹1,200 and unpaid call = 600 × ₹5 = ₹3,000; total calls in arrears = ₹4,200.

ACCOUNTANCY · Grade 12 · CBSE(NCERT)

Practice Chapter 5: Accounting for Share Capital with a free chapter-wise online MCQ test for CBSE(NCERT) Grade 12 ACCOUNTANCY. This chapter covers: Share Capital Equity Shares Preference Shares Issue of Shares Share Premium Oversubscription Pro Rata Allotment Calls in Arrears Share Forfeiture Reissue of Shares Capital Reserve.... AI-generated questions from basic to board-exam level, with instant results and explanations.

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Chapter 5: Accounting for Share Capital — Important Questions & Answers (FAQ)

Frequently asked questions from CBSE(NCERT) Grade 12 ACCOUNTANCY — Chapter 5: Accounting for Share Capital, with answers and explanations. These are sample questions; the exam has its own separate question set.

Which type of shares carry voting rights and receive dividend only after preference shareholders are paid?

A. Equity shares ✓
B. Preference shares
C. Debentures
D. Reserve shares

Answer: A. Equity shares
Equity shareholders are the real owners of the company and usually carry voting rights. They receive dividend after preference shareholders.

The maximum amount of share capital that a company is authorised to issue by its Memorandum of Association is called:

A. Issued capital
B. Subscribed capital
C. Authorised capital ✓
D. Called-up capital

Answer: C. Authorised capital
Authorised capital is the maximum capital mentioned in the Memorandum of Association. A company cannot issue shares beyond this limit unless it alters its memorandum.

Calls in arrears represent:

A. Money received before it is called
B. Money called by the company but not yet received ✓
C. Premium received on shares
D. Profit on reissue of forfeited shares

Answer: B. Money called by the company but not yet received
Calls in arrears arise when shareholders fail to pay the amount called by the company. It is deducted from called-up share capital in the balance sheet.

Securities Premium Reserve may be used for which of the following purposes?

A. Payment of dividend
B. Writing off preliminary expenses ✓
C. Payment of salary to directors
D. Purchase of inventory

Answer: B. Writing off preliminary expenses
As per the Companies Act, Securities Premium Reserve can be used for specific purposes such as writing off preliminary expenses. It cannot be freely distributed as dividend.

When shares are issued at a premium and the premium is due with allotment money, which account is credited for the premium amount?

A. Share Capital Account
B. Securities Premium Reserve Account ✓
C. Share Allotment Account
D. Capital Reserve Account

Answer: B. Securities Premium Reserve Account
Premium received or due on issue of shares is credited to Securities Premium Reserve Account. Share Capital Account is credited only with the nominal value.

A company issued 10,000 shares and received applications for 12,000 shares. Applications for 2,000 shares were rejected. If application money was ₹3 per share, what amount will be refunded?

A. ₹3,000
B. ₹6,000 ✓
C. ₹30,000
D. ₹36,000

Answer: B. ₹6,000
Refund is made only for rejected applications. Amount refunded = 2,000 shares × ₹3 = ₹6,000.

A company forfeited 1,000 shares of ₹10 each, ₹8 called-up. The shareholder had paid ₹5 per share. These shares were reissued as ₹8 paid-up for ₹7 per share. What amount will be transferred to Capital Reserve?

A. ₹1,000
B. ₹4,000 ✓
C. ₹5,000
D. ₹7,000

Answer: B. ₹4,000
Amount forfeited = 1,000 × ₹5 = ₹5,000. Discount on reissue = 1,000 × ₹1 = ₹1,000, so Capital Reserve = ₹5,000 - ₹1,000 = ₹4,000.

A company issued 20,000 shares payable ₹2 on application, ₹3 on allotment and ₹5 on first and final call. Applications were received for 30,000 shares; 5,000 applications were rejected and the remaining were allotted pro rata. Mohan applied for 500 shares. How much allotment money will Mohan pay?

A. ₹800
B. ₹1,000 ✓
C. ₹1,200
D. ₹1,500

Answer: B. ₹1,000
Mohan is allotted 500 × 20,000/25,000 = 400 shares. Allotment due = 400 × ₹3 = ₹1,200; excess application money = 100 × ₹2 = ₹200, so amount payable = ₹1,000.

Which statement is correct regarding share premium already received on shares that are later forfeited?

A. It is transferred to Share Forfeiture Account
B. It is transferred to Capital Reserve immediately
C. It remains in Securities Premium Reserve Account ✓
D. It is refunded to the defaulting shareholder

Answer: C. It remains in Securities Premium Reserve Account
If premium has already been received, it is not reversed on forfeiture. It remains credited to Securities Premium Reserve Account.

A company issued shares payable ₹2 on application, ₹3 on allotment and ₹5 on call. After rejecting some applications, the remaining applicants were allotted shares in the ratio of 2 shares for every 3 shares applied. A shareholder applied for 900 shares and failed to pay allotment and call money. What amount will be shown as calls in arrears for this shareholder?

A. ₹3,000
B. ₹3,600
C. ₹4,200 ✓
D. ₹4,800

Answer: C. ₹4,200
He is allotted 900 × 2/3 = 600 shares. Excess application money = 300 × ₹2 = ₹600; allotment due = 600 × ₹3 = ₹1,800, so unpaid allotment = ₹1,200 and unpaid call = 600 × ₹5 = ₹3,000; total calls in arrears = ₹4,200.

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