Theory MCQs of Accounting for Share Capital Class 12

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Looking for important Theory MCQs of Accounting for share capital chapter with answers of Accountancy class 12 CBSE, ISC and state Boards.

We have compiled very important issue of shares theory MCQs with answers of Volume 2 of Accountancy class 12

Theory Multiple Choice Questions with answers of Accounting for share capital class 12

Let’s Practice

A company has

a) Separate Lega Entity
b) Perpetual Existence
c) Limited Liability
d) All of the above

Ans – d)

Shareholders are:

a) Customers of the company
b) Owners of the company
c) Creditors of the company
d) None of these

Ans – b)

Who are the real owners of a company?

a) Government
b) Board of Directors
c) Equity shareholders
d) Debentureholders

Ans – c)

A company is created by:

a) Special act of the Parliament
b) Companies Act
c) Investors
d) Members

Ans – b)

An artifical person created by Law is called:

a) Sole Tradership
b) Partnership Firm
c) Company
d) All of the above

Ans – c)

The liability of members in a company is:

a) Limited
b) Unlimited
c) Stable
d) Fluctuating

Ans – a)

Liability of a shareholder is limited to _____ of the shares allotted to
him.

a) Paid up value
b) Called up value
c) Face value
d) Reserve Price

Ans – c)

Maximum number of members is a parivate company is:

a) 7
b) 200
c) 20
d) No limit

Ans – b)

Capital of a company is divided in units which is called:

a) Debenture
b) Share
c) Stock
d) Bond

Ans – b)

Shareholders receive from the company:

a) Interest
b) Commission
c) Profit
d) Dividend

Ans – d)

Equity shares can not be issued for the purpose of :

a) Cash receipts
b) Purchsae of assets
c) Redemption of debentures
d) Distribution of dividend

Ans – d)

A company may issue __

a) Equity Shares
b) Preference Shares
c) Equity and Preference Both Shares
d) None of the above

Ans – c)

A company can not isse:

a) Redeemable Equity Shares
b) Redeemable Preference Shares
c) Redeemable Debentures
d) Fully Convertible Debentures

Ans – a)

To whom dividend is given at a fixed rate in a company?

a) To equity shareholdres
b) To preference shareholders
c) To debentureholders
d) To Promoters

Ans – b)

Preference shareholders have

a) Preferential right as to dividend only
b) Preferenctial right in the Management
c) Preferenctial right as to repayment of capital at the time of liquidation of the company
d) Preferential right as to dividend and repayment of capital at the time of
liquidation of the company

Ans – d)

The shares on which there is a no any pre-fixed rate of dividend is decided, but the
rate of dividend is fluctuating every year according to the availability of profits,
such share are called:

a) Equity share
b) Non-Cumulative preference share
c) Non-Convertible Preference Share
d) Non-Guarantedd preference share

Ans – a)

Preference shares, in case the holders of these have a right to convert their preference shares
into equity shares at their option according to the terms of issue, such shares are
called:

a) Cumulative Preference Share
b) Non-Cumulative Preference Shre
c) Convertible Preference Share
d) Non-Convertible Preference Share

Ans – c)

A preference share which does not carry the right of sharing in surplus profits is called

a) Non-Cumulative Preference Share
b) Non-Participating Preference Share
c) Irredeemable Preference Share
d) Non-convertible Preference Share

Ans – b)

Which shareholders have a right to receive the arrears of dividend from future profits:

a) Redeemable Preference Shares
b) Paticipating Preference Shares
c) Cumulative Preference Shares
d) Non-Cumualative Preference Shares

Ans – c)

Which shareholders are returned their capital after some specified time:

a) Redeemable Preference Shares
b) Irredeemable Preference Shares
c) Cumulative Preference Shares
d) Paticipating Preference Shares

Ans – a)

The following statements apply to equity/preference shareholders. Which one of them
applies only to preference shareholders?

a) Shareholders risk the loss of investment
b) Shareholders bear the risk of no dividends in the event of losses
c) Shareholders usually have the right to vote
d) Dividends are usually given at a set amount in every financial year.

d)

Unless otherwise stated, a preference share is always deemed to be:

a) Cumulative, participating and non convertible
b) Non-cumulative, non-participating and non-converitble
c) Cumulative, non-participating and non-convertible
d) Non-cumulative, participating and non-convertible

Ans – c)

Nominal Share capital is __

a) that part of authorised capital which is issued by the company
b) the amount of capital which is actually applied by the prospective shareholders
c) the amount of capital which is actually paid by the shareholders
d) the maximum amount of share capital which a company is authorised to issue.

Ans – d)

Subscribed capital is:

a) That part of authorised capital which is issued to the public for subscription
b) That part of issed capital which has been actually subscribed by the public
c) That part of subcribed capital which has been called up on the shares.
d) That part of subscribed capital which has not yet been called up on the shares.

Ans – b)

The portion of the capital which can be called up only on the winding up of the company
is called___________

a) Authorised Capital
b) Called up Capital
c) Uncalled Capital
d) Reserve Capital

Ans – d)

Capital included in the Total of Balance Sheet of a company is called:

a) Issued Capital
b) Subscribed Capital
c) called up capital
d) Authorised Capital

Ans – b)

_ is transferred to capital reserve.

a) Profit from sale of fixed assets
b) Premium on issue of shares
c) Profit on foreiture of shares
d) All of the above

Ans – d)

Reserve Capital is also known by:

a) Capital Reserve
b) Called up Capital
c) Subscribed Capital
d) None of the above

Ans – d)

Reserve capital is:

a) Subscribed capital
b) Capital Reserve
c) Uncalled Capital
d) Part of the uncalled capital which may be called only at the time of liquidation
of the company

Ans – d)

Which of the following statements does not relate to ‘Reserve Capital'”

a) It is part of uncalled capital of a company
b) It can not be uesd during the lifetime of a company
c) It can be used for writing off capital losses
d) It is part of subscribed capital

Ans – c)

In the Balance Sheet of a company, under the heading share capital, at the last is
shown:

a) Authorised Share capital
b) Subscribed share capital
c) Issued share capital
d) Reserve Share capital

Ans – b)

Which of the following is not shown under the heading ‘share capital; in a Balance Sheet.

a) Subscribed capital
b) Issued capital
c) Reserve Capital
d) Authorised Capital

Ans – c)

Reserce capital is a part of:

a) Paid up capital
b) Foreited share capital
c) Assets
d) Capital to be called up only on liquidation of company

Ans – d)

Which of the following statements is true?

a) Authorised capital = Issued capital
b) Authorised capital > Issued capital
c) Paid up capital > Issued capital
d) None of the above

Ans – b)

Authorised capital of a company is mentioned in:

a) Memorendum of Association
b) Articles of Association
c) Prospectus
d) Statement in lieu of Prospectus

Ans – a)

In case of Private placement of shares, the lock in period is:

a) 1 year
b) 2 year
c) 3 year
d) None of the above

Ans – c)

In case of private palcement of shares and company does not invite the general public
for subscription of shares in that case, company instead of issuing prospectus:

a) Prepares the statement in lieu of prospectus
b) Prepares the report
c) Prepares the Budget
d) Preapres the Asset side of Balance Sheet

Ans – a)

In case of private placement of shares, to raise the amount of capital a company:

a) invites the public thorugh prospectus
b) does not invite the public
c) invites the public through advertisement
d) invites the public thorugh memorendum of association

Ans – b)

Shares issued by a company to its employees or directors in consideration of
‘Intellectual Property Rights’ are called:

a) Right Equity Shares
b) Private Equity Shares
c) Sweat Equity Shares
d) Bonus Equity Shares

Ans – c)

A company may issue the shares:

a) By Private Placement of shares
b) By public subscription of shares
c) For consideration other than cash
d) By all of the above

Ans – d)

Public subscription of shares include:

a) To issue prospectus
b) To receive applications
c) To make Allotment
d) All of the above

Ans – d)

Which of the following will define, when appropriatoins of a certain number of
shares in made to an applicant in response to his application?

a) Share allotment
b) Share forfeiture
c) Share Trading
d) Share Purchase

Ans – a)

Issue of shares at a price lower than its face value is called:

a) Issue at a loss
b) Issue at a profit
c) Issue at a discount
d) Issue at a premium

Ans – c)

According to SEBI Guidelines, Minimum Subscription has been fixed at_______
of the issued amount.

a) 25%
b) 50%
c) 90%
d) 100%

Ans – c)

One of the conditions, in addition to others, for allotment of shares is:

a) Resolution in General Meeting
b) Receiving Minimum Subscription
c) Full Subscription by Public
d) Full Payment on Application

Ans – b)

Persons who start a company are called____________

a) Shareholders
b) Directors
c) Promoters
d) Auditors

Ans – c)

Minimum subscription amount of 90% is related to which share capital:

a) Authorised Capital
b) Issued Capital
c) Paid up capital
d) Reserve Capital

Ans – b)

Share Application Account is in the nature of:

a) Real Account
b) Personal Account
c) Nominal Account
d) None of the above

Ans – b)

As per SEBI guidellines, Application money should not be less than________

a) 10%
b) 15%
c) 25%
d) 50%

Ans – c)

4000 Equity shares of ₹ 10 each were issued at 8% premium to the promoters of a company
for their services. Which account will be debited?

a) Share Capital Account
b) Goodwill Account/Incorporation Cost Account
c) Securities Premium Reserve Account
d) Cash Account

Ans – b)

Excess value of net assets over purchase consideration at the time of purchase of
business is:

a) Credited to the Capital Reserve
b) Debited to the Goodwill Account
c) Credited to the General Reserve Account
d) Credited to the Vendor’s Account

Ans – a)

If vendors are issued full paid shares of ₹ 1,25,000 in consideration of net assets
of ₹ 1,50,000, the balance of ₹ 25,000 will be credited to:

a) Statement of Profit & Loss
b) Goodwill Account
c) Security Premium Reserve Account
d) Capital Reserve Account

Ans – c)

Issue of shares at a price higher than its face value is called:

a) Issue at a profit
b) Issue at a premium
c) Issue at a discount
d) Issue at a loss

Ans – b)

On issue of shares Premium is:

a) Profit
b) Income
c) Revenue Receipt
d) Capital Profit

Ans – d)

Which of the following is not a capital profit?

a) Profit prior to incorporation of the company
b) Profit from the sale of fixed assets
c) Premium on issue of shares
d) compensation received on the termination of a contract

Ans – d)

Maximum limit of premium on shares is:

a) 5%
b) 10%
c) No limit
d) 100%

Ans – c)

When a company issues shares at a premium, the amount of premium should be received
by the company:

a) Along with application money
b) Along with allotment money
c) Along with calls
d) Along with any of the above

Ans – d)

Amount of securities premium can be utilised for:

a) Writing off the preliminary expenses of the company
b) Issuing bonus shares to the shareholders of the company
c) Buy-back of its own shares
d) All of the above

Ans – d)

For what purpose securities premium reserve account can not be utilized.

a) Amortization of preliminary expenses
b) Distribution of dividend
c) Issue of fully paid bonus shares
d) Buy Back of own shares

Ans – b)

Which of the following is not a purpose for which the securities premium amount
can be used?

a) Issuing fully paid bonus shares to shareholders
b) Issuing partly paid up bonus shares to shareholders
c) Writing off preliminary expenses of the company
d) In purchasing its own shares (buy back)

Ans – b)

Premium on the issue of shares should be shown:

a) On the Assets side of Balance Sheet
b) On the equity & Liabilities side of Balance Sheet
c) In profit & Loss Statement
d) None of the above

Ans – b)

Interest on Calls in arrears is charged according to Table F at:

a) 6% p.a.
b) 10% p.a.
c) 5% p.a.
d) 12% p.a.

Ans – b)

Amount of Calls in Arrears is shown in the Balance Sheet

a) as deduction from issued capital
b) as deduction from subscribed capital
c) as addition to subscribed capital
d) on the assets side

Ans – b)

As per Table F, the company is required to pay _ interest on the amount of
calls in advance.

a) 12% p.a.
b) 5% p.a.
c) 10% p.a.
d) 6% p.a.

Ans – a)

Amount of Calls in Advance is

a) Added to share Capital
b) Deducted from share capital
c) shown on the assets side
d) shown on the equity & Liabilities side

Ans – d)

First call amount received in advance from the shareholders before it is actually
called up by the directors is:

a) Debited to calls in advance account
b) Credited to share allotment account
c) Debited to first call account
d) Credited to calls in advance account

Ans – d)

From which account, expenses on issue of shares will be written off first of all:

a) Statement of profit and loss
b) Miscellaneous Expenditure account
c) Share issue expenses account
d) Securities Premium Reserve Account

Ans – d)

Forfeiture of shares results in the reduction of :

a) Subscribed capital
b) Authorised Capital
c) Reserve Capital
d) Fixed Assets

Ans – a)

Which one of the following items is not a part of subscribed capital?

a) Equity Shares
b) Preference Shares
c) Forfeited Shares
d) Bonus Shares

Ans – c)

At the time of forfeiture of shares the share capital account is debited with

a) Face value
b) called up value
c) Paid up value
d) Issued value

Ans – b)

Voluntary return of shares for cancellation by the shareholders is called

a) Cancellation of shares
b) Forfeiture
c) Surrender of shares
d) None of these

Ans – c)

If the premium on the forfeited shares has already been received, then Securities
Premium A/c should be:

a) Credited
b) Debited
c) No Treatment
d) None of these

Ans – c)

Balance of share forfeiture account is shown in the balance sheet under the head____

a) Share capital account
b) Reserve and Surplus
c) Current libailiteis and provisions
d) Unsecured loans

Ans – a)

The amount of discount on reissue of forfeited shares can not exceed:

a) 5% of the face value
b) 10% of the face value
c) The amount received on forfeited shares
d) The amount not received on forfeited shares

Ans – c)

Discount allowed on re-issue of forfeited sahres is debited to:

a) Share capital A/c
b) Share Forfeiture A/c
c) Statement of Profit and loss
d) General Reserve A/c

Ans – b)

The balance of the forfeited shares account after reissue of forfeited shares is
transferred to:

a) Statement of Profit and Loss
b) Share Capital A/c
c) Capital Reserve A/c
d) General Reserve A/c

Ans – c)

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Anurag Pathak
Anurag Pathak

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