Accounting for Share Capital

Topics in this chapter

• Share Capital Structure and Legal Requirements
• Share Application and Allotment
• Oversubscription and Pro-Rata Allotment
• Special Issues and Non-Cash Consideration
• Securities Premium and Share Discount
• Calls in Arrears and Share Forfeiture
• Reissue of Forfeited Shares

Cheat sheet

Practice questions

1. Question 1Q-FFEBFE

   What is the maximum amount of capital that a company is authorized to raise by its Memorandum of Association?

   1. A.Issued Capital
   2. B.Authorized Capital
   3. C.Subscribed Capital
   4. D.Paid-up Capital
   See the answer and solution
2. Question 2Q-AE6577

   ABC Ltd. forfeited 1,000 shares of Rs. 10 each issued at 10% premium, on which the first call of Rs. 3 per share was not paid. The final call of Rs. 2 per share has not yet been made. What amount should be credited to Share Forfeiture Account at the time of forfeiture?

   1. A.Rs. 5,000
   2. B.Rs. 8,000
   3. C.Rs. 6,000
   4. D.Rs. 7,000
   See the answer and solution
3. Question 3Q-E253D5

   Which of the following items is shown under the head 'Reserves and Surplus' in the Balance Sheet of a company?

   1. A.Calls-in-Advance
   2. B.Securities Premium Reserve
   3. C.Forfeited Shares Account balance (after reissue)
   4. D.Capital Reserve from profit on reissue
   See the answer and solution
4. Question 4Q-18E212

   X Ltd. issued 50,000 equity shares of Rs. 10 each payable as Rs. 3 on application, Rs. 4 on allotment, and Rs. 3 on first and final call. Applications were received for 70,000 shares. The directors decided to reject applications for 10,000 shares and pro-rata allotment was made to the remaining applicants. How much excess application money was adjusted towards allotment?

   1. A.Rs. 30,000
   2. B.Rs. 60,000
   3. C.Rs. 20,000
   4. D.Rs. 40,000
   See the answer and solution
5. Question 5Q-709C86

   As per the Companies Act, 2013, what is the minimum percentage of the nominal value of share capital that must be collected as minimum subscription before proceeding with the allotment of shares?

   1. A.50%
   2. B.75%
   3. C.90%
   4. D.100%
   See the answer and solution