CBSE Class 12 Accountancy Share Capital Worksheet Set 01

Question : Name different types of Share Capital.  

MCQ Questions for NCERT Class 12 Accountancy Company Accounts

Question. If applicants for 80,000 shares were allotted 60,000 shares on pro rata basis , the shareholders who was allotted 1,200 shares must have applied for:
(a) 900 shares
(b) 3,600 shares
(c) 1,600 shares
(d) 4,800 shares

Answer: C

Question. If shares of Rs 4,00,000 are issued for purchase of assets of Rs 5,00,000, Rs 1,00,000 will be treated as ..........
(a) Discount
(b) Premium
(c) Profit
(d) Loss

Answer: B

Question. Who are the real owners of the Company?
(a) Government
(b) Board of directors
(c) Equity shareholders
(d) Debenture holders

Answer: C

Question. Maximum number of members in a private Company is :
(a) 7
(b) 200
(c) 20
(d) No limit

Answer: B

Question. 600 shares of Rs 10 each were forfeited for non payment of Rs 2 per share on first call and Rs 5 per share on final call. Share forfeiture account will be credited with:
(a) Rs 1,200
(b) Rs 1,800
(c) Rs 3,000
(d) Rs 4,200

Answer: B

Question. In case of private placement of shares to raise capital a company:
(a) Invite the public through prospectus
(b) Does not invite the public
(c) Invite the public through advertisement
(d) None of the above

Answer: B

Question. Forfeiture of shares result in reduction of :
(a) Subscribed capital
(b) Authorised capital
(c) Reserve capital
(d) None of the above

Answer: A

Question. Capital reserves are created from
(a) Capital Profit
(b) Average Profit
(c) Share Profit
(d) None of the options

Answer: A

Question. Which of the following statement in false
(a) Bonus shares can be issued out revaluation profit.
(b) Bonus issue is made out of free reserves or securities premium collected in cash only
(c) No bonus issue shall be made within 12 months of any public or right issue.
(d) Company can issue bonus shares in any ratio

Answer: A

Question. Those companies whose shares are listed on a recognised stock exchange for public trading
(a) Government Company
(b) Listed Company
(c) Private Company
(d) Limited company

Answer: B

Question. Share capital of a company can be divided into
(a) All of the options
(b) Authorised Capital
(c) Issued Capital
(d) Subscribed Capital

Answer: A

Question. What type of shares can be issued at discount?
(a) Equity Shares
(b) Preference Shares
(c) None of the options
(d) Sweat Equity Shares

Answer: D

Question. 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

Answer: C

Question. Balance in forfeited share account is shown in the balance sheet under the head of
(a) Reserves and surplus
(b) Current liabilities
(c) None of the options
(d) Share capital.

Answer: D

Question. Which company has special rights under Companies Act 3 (i) section (iii)
(a) Private Company
(b) Limited company
(c) Illegal company
(d) None of the options

Answer: A

Question. If a share of Rs. 100 on which Rs.60 has been paid, is forfeited, it can be re-issued at the minimum price of:
(a) Rs. 60
(b) Rs.100
(c) Rs. 40
(d) Rs.140

Answer: C

Question. Shareholders are :
(a) Customers of the Company
(b) Owners of the Company
(c) Creditors of the Company
(d) None of these

Answer: B

Question. Maximum number of members in a private company is :
(a) 7
(b) 200
(c) 20
(d) No Limit

Answer: B

Question. 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 Share
(c) Convertible Preference Share
(d) Non-convertible Preference Share

Answer: C

Question. 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

Answer: D

Question. As per SEBI Guidelines, Application money should not be less than ……………. of the issue price of each share.
(a) 10%
(b) 15%
(c) 25%
(d) 50%

Answer: C

Question. Which of the following will define, when appropriation of a certain number of shares is made to an applicant in response to his application? 
(a) Share allotment
(b) Share forfeiture
(c) Share trading
(d) Share Purchase

Answer: A

Question. A Company issued 50,000 shares of ₹20 each at 5% premium. ₹10 were payable on application and balance on allotment. What will be the allotment amount?
(a) ₹5,00,000
(b) ₹4,75,000
(c) ₹5,50,000
(d) ₹5,25,000

Answer: C

Question. If vendors are issued fully paid shares of Rs. 1,25,000 in consideration of net assets of Rs. 1,50,000, the balance of Rs.25,000 will be credited to :
(a) Statement of Profit & Loss
(b) Goodwill Account
(c) Security Premium Reserve Account
(d) Capital Reserve Account

Answer: C

Question. The shares on which there is 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-guaranteed preference share

Answer: A

Question. If the premium on forfeited shares has already been received , then securities premium A/c should be:
(a) Credited
(b) Debited
(c) No treatment
(d) None of these

Answer: C

Question. As per SEBI Guidelines , Application money should not be less than ....... ..of the issue price of each shares:
(a) 10%
(b) 15%
(c) 25%
(d) 50%

Answer: C

Question. Issued 20,000 , 12% debenture of Rs 100 each at a premium of 4%, redeemable at a premium of 10%. In such case:
(a) Loss on issue will be debited by Rs 1,20,000
(b) Loss on issue will be debited by Rs 2,00,000
(c) Loss on issue will be debited by Rs 2, 88,000
(d) None of the above

Answer: B

Question. When Articles of Association of a company is silent then interest on calls in advance is provided at
a) 12% p.a.
b) 5% p.a.
c) 6% p.a.
d) 10% p.a.

Answer: A

Question. Securities Premium Reserve Account can be used for :
a) Paying tax liability
b) paying dividend on shares
c) allowing discount on the re-issue of forfeited shares
d) Meeting the cost of issue of shares or debentures

Answer: D

Question. Loose tools should be shown as
a) On the assets side of the balance sheet ,main head current assets, sub head inventories
b) Other expenses in Statement of Profit & Loss
c) Finance costs in Statement of Profit & Loss
d) On the assets side of the balance sheet

Answer: A 

Question. Discount allowed on the re issue of forfeited shares cannot exceed :
a) 10% of the paid up capital
b) 10% of the reissued capital
c) the amount received on forfeited shares
d) Amount not received on the forfeited shares

Answer: C

Question. If a share of ₹10 issued at a premium of ₹ 2 , on which ₹ 9 (including premium) have been called and ₹ 5 (including premium) paid is forfeited , the share capital account should be debited by
a) ₹ 12
b) ₹10
c) ₹ 9
d) ₹ 7

Answer: D
 

Fill in the blanks:

Question. Share capital of a company is divided into small units. Each such unit is called .......
Answer: Shares

Question. .............. Shareholders are given dividend at a fixed rate.
Answer: Preference shareholders

Question. A ........... Company is one which restricts the rigt to transfer its shares.
Answer: Private Ltd Company

Question. Actual number of shares offered to the public for subscription is known as ...........
Answer: Issued capital

Question. At the time of forfeiture of shares , Share capital account will be debited with ........ value
Answer: Called up value of shares

Question. A private Ltd. Company with only one person as its members is called .............
Answer: One person company (OPC)

True or False :

Question. Pro rata allotment is made in case of over subscrriptions 
Answer: True

Question. Shares cannot be issued at discount 
Answer: True

Question. Equity shareholders are the creditors of the Company
Answer: True

Question. Application money should not be less than 25% of the face value of shares 
Answer: True

Question. Promoters are the owners of the Company 
Answer: False

Question. Formed by special act of the legislature or parliament Called
(a) Statutory Company
(b) Guarantee company
(c) Chartered companies
(d) None of the options

Answer: A

Question. Minimum number of directors in Pvt. Ltd company
(a) 3
(b) 2
(c) 4
(d) No limit

Answer: B

Question. Deepak Ltd. offered for subscription 5,50,000 equity shares of Rs. 10 each.The public applied for 5,00,000 shares.
The call ( Rs. 8 per share) was received except from Gopal, who holds 4,000 shares has not paid after application money of Rs. 2 per share and from Shyam who holds 1,000 shares has paid only Rs. 6 per share. Gopal's shares were forfeited. The amount of subscribed capital to be disclosed in the Balance Sheet is
(a) Rs.39,96,000.
(b) Rs.39,74,000.
(c) Rs.49,46,000.
(d) Rs.49,74,000.

Answer: B

Question. A company purchased machinery for Rs. 1,80,000 and in consideration issued shares at 20% premium. What will be the face value of shares issued :
(a) Rs. 1,50,000
(b) Rs. 1,44,000
(c) Rs. 1,80,000
(d) Rs.2,16,000

Answer: A

Question. The portion of the authorised capital which can be called-up only on the liquidation of the company is called
(a) Authorised capita
(b) Issued capital
(c) Reserve capital
(d) Called up capital

Answer: C

Question. Issue of share at a discount must be authorised by a resolution passed by the company in general meeting and duly sanctioned by the
(a) Central government.
(b) State government.
(c) Local government
(d) None of the options

Answer: A

Question. Capital of a Company is divided in units which is called :
(a) Debenture
(b) Share
(c) Stock
(d) Bond

Answer: B

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

Answer: D

Question. A Company invited applications for 1,00,000 shares and it received applications for 1,50,000 shares. Applications for 30,000 shares were rejected and the remaining were allotted shares on prorata basis. How many shares an applicant for 3,000 shares will be allotted :
(a) 2,500 Shares
(b) 3,600 Shares
(c) 4,500 Shares
(d) 2,000 Shares

Answer: A

Question. XY Limited issued 2,50,000 equity shares of Rs. 10 each at a premium of Rs.1 each payable as Rs.2.5 on application, Rs.4 on allotment and balance on the first and final call. Applications were received for 5,00,000 equity shares but the company allotted to them only 2,50,000 shares. Excess money was applied towards amount due on allotment. Last call on 500 shares was not received and shares were forfeited after due notice. This is a case of:
(a) Over subscription
(b) Pro-rata allotment
(c) Forfeiture of Shares
(d) All of the above

Answer: D

Question. A company is said to be Deemed Public company if its Annual Turnover exceeds
(a) 25 Crores.
(b) 20 Crore
(c) 30 Crore
(d) None of the options

Answer: A

Question. 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

Answer: B

Question. Authorised Capital of a Company is mentioned in :
(a) Memorandum of Association
(b) Articles of Association
(c) Prospectus
(d) Statement in lieu of Prospectus

Answer: A

Question. A Company is
(a) All of the options
(b) Has separate legal identity
(c) Has Perpetual existence
(d) Has Common seal

Answer: A

Question. Minimum number of members in a Public Company
(a) 5
(b) 2
(c) 7
(d) 3

Answer: C

Question. Issue of share at a discount
(a) Section 79
(b) Section 78
(c) Section 76
(d) None of the options

Answer: A

Question. Section 591of Act states this type of company is incorporated outside India but has established business in India, Called
(a) Government Company
(b) Private company
(c) Foreign Company
(d) Limited company

Answer: C

Question. Capital raised by issue of shares is called
(a) Authorised Capital
(b) Share capital.
(c) Called up Capital
(d) None of the options

Answer: B

Question. When Second instalment paid
(a) On allotment
(b) On Application
(c) Both
(d) None of the options

Answer: A

Question. Reserve Capital is also known by :
(a) Capital Reserve
(b) Called up Capital
(c) Subscribed Capital
(d) None of the above

Answer: D

Question. If shares of Rs.4,00,000 are issued for purchase of assets of Rs.5,00,000, Rs. 1,00,000 will be treated as ................ :
(a) Discount
(b) Premium
(c) Profit
(d) Loss

Answer: B

Question. Which of the following will define, when appropriation of a certain number of shares is made to an applicant in response to his application?
(a) Share allotment
(b) Share forfeiture
(c) Share trading
(d) Share Purchase

Answer: A

Question. A Company offered 50,000 shares of ?10 each at par payable as to ?3 on applications, ?5 on allotment and the balance on final call. Applications were received for 60,000 shares and the allotment was made pro-rata. The excess application money was to be adjusted on allotment and call. How much amount will be transferred from Share Application A/c to Share Allotment A/c?
(a) ₹1,80,000
(b) ₹30,000
(c) ₹1,50,000
(d) ₹50,000

Answer: B

Question. An artificial person created by Law is called :
(a) Sole Tradership
(b) Partnership Firm
(c) Company
(d) All of the Above

Answer: C

Question. When shares are forfeited. Share Capital Account is debited with
(a) nominal (face) value of shares.
(b) called-up share capital.
(c) paid-up value of shares.
(d) market value of shares.

Answer: B

MCQ Questions for NCERT Class 12 Accountancy Company Accounts

Question. Z Ltd. forfeited 1,000 equity shares of Rs. 10 each issued at a premium of 20% for the non-payment of the final call of Rs. 3 per share. Calculate the maximum amount of discount at which these shares can be reissued.
(a) Maximum permissible discount is Rs.9,000
(b) Maximum permissible discount is Rs.7,000
(c) Maximum permissible discount is Rs.3,000
(d) Shares can't be re-issued at discount

Answer : B

Question. Rahul, an applicant of 5,000 shares and who was allotted 4,000 shares paid application money of Rs.3 per share but failed to pay allotment money of Rs.5 per share. Though he had paid allotment arrear dues with First call of Rs.2 per share. What amount will be paid by Rahul at the time of first call being received by company to clear his dues?
(a) Rs.8,000
(b) Rs.25,000
(c) Rs.17,000
(d) Rs.28,000

Answer : B

Question. A company invited applications for 5,00,000 shares of Rs.10 each. What minimum amount can be asked by the company on application per share?
(a) Rs.2 per share
(b) Rs.3 per share
(c) Rs.0.50 per share
(d) Rs.1 per share

Answer : C

Question. Azab Gazab Ltd. issued 50,000 shares of Rs.10 each issued at Rs.2 premium payable Rs.5 on application (including premium), Rs.4 on allotment and balance on call. Public had applied for 80,000 shares out of which applications for 10,000 shares were rejected. Mr.Mogambo who had applied for 3,500 shares failed to pay allotment and call money and his shares were forfeited. Out of these 2,000 shares were re-issued @Rs.8 per share as fully paid up. What amount of Share Capital will be shown in the Balance Sheet?
(a) Share Capital Rs.4,95,000
(b) Share Capital Rs.5,94,000
(c) Share Capital Rs.4,97,500
(d) Share Capital Rs.5,01,000

Answer : C

Question. Andaaz Ltd. company took over Assets of Rs.20,00,000 and Liabilities of Rs.4,50,000 from Bebaak Ltd. and in consideration issued them 15,000, 12% Preference Shares of Rs.100 each at 20% premium. Which of the following will hold true?
(a) Capital Reserve will be created of Rs.2,50,000
(b) Goodwill will be created of Rs.2,50,000
(c) Capital Reserve will be created of Rs.6,50,000
(d) Goodwill will be created of Rs.6,50,000

Answer : B

Question. The company has to get minimum subscription within ___________ from the date of the issue of the prospectus.
(a) 110 days
(b) 120 days
(c) 130 days
(d) 4 months

Answer : B

Question. Aladdin Co. Ltd issued 80,000 shares of Rs.10 each payable Rs.3 on Application, Rs.5 on allotment and balance on call. Public had applied for 75,000 shares and all the calls were made. All the money has been duly received except allotment and call money on 6,000 shares held by Gaurav. His shares were forfeited and later on re-issued 4,000 shares @ Rs.12 per share as fully paid up. What amount will be transferred to Capital Reserve?
(a) Rs.18,000
(b) Rs.12,000
(c) Rs.20,000
(d) Rs.6,000

Answer : B

Question. X Ltd forfeited 1,000 shares of Rs.10 each for non-payment of final call of Rs.4 each. After the reissue of these shares Rs.1,500 were transferred to capital reserve. Shares were reissued for Rs.____
(a) Rs.4,500
(b) Rs.6,000
(c) Rs.5,500
(d) Rs.8,500

Answer : C

Question. Securities Premium Reserve cannot be utilised for which of the following purpose?
(a) Writing off Preliminary Expenses
(b) Issuing Bonus shares to convert partly paid up shares into fully paid up shares
(c) Writing off discount/Loss on Issue of Debentures
(d) Providing for premium payable on redemption of Debentures or Preference Shares

Answer : B

Question. Eena Meena Deeka Ltd. issued 60,000 shares of Rs.10 each issued at Rs.2 premium, payable Rs.2 on application, Rs.7 on allotment (including premium) and balance on call. Public had applied for 80,000 shares out of which applications for 5,000 shares were rejected. Mr.Chandermohan holding 3,000 shares failed to pay allotment money and his shares were forfeited immediately. Out of these 2,000 shares were re-issued @Rs.6 per share as Rs.7 paid up. Final call was not yet made. What will be the balance of Share Forfeited account after re-issue?
(a) Nil
(b) Rs.3,000
(c) Rs.2,500
(d) Rs.7,500

Answer : C

Question. Assertion (A) :- Company may not provide for rate of Interest on calls in Arrears and Interest on calls in advance in their Articles of Association ;
Reason (R) If Articles of Association is silent then Table F of Companies Act,2013 is followed.
(a) Both A and R are True and R is correct explanation of A
(b) Both A and R are True but R is not the correct explanation of A
(c) A is incorrect but R is correct
(d) Both A and R are incorrect.

Answer : A

Question. Assertion (A):- Maximum rate of Premium can be 10% of the face value.
Reason (R):- It is restricted by SEBI for maximum rate of Securities Premium at which shares can be issued.
(a) Both A and R are True and R is correct explanation of A
(b) Both A and R are True but R is not the correct explanation of A
(c) A is true but R is false
(d) Both A and R are False

Answer : D

Question. Statement I :- Premium money received at the time of allotment can be forfeited.
Statement II :-In case of Over-subscription (Pro-rata allotment) Premium money received at the time of Application can only be utilised with premium due on allotment.
(a) Both statements are True
(b) Only Statement I is True.
(c) Both statements are False
(d) Only Statement II is True.

Answer : C

Question. A Company invited applications for 2,00,000 shares of Rs.10 each issued at Rs.10 each payable Rs.3 on application, Rs/.5 on allotment and balance whenever required. Public applied for 2,50,000 shares. Shares were not yet allotted. How will you disclose the above information in Balance Sheet of the company?
(a) Share Application money pending allotment as Rs.7,50,000
(b) Share Application money pending allotment as Rs.6,00,000 and Bank Overdraft of Rs.1,50,000
(c) Share Capital of Rs. 6,00,000 and Share Application money pending allotment of Rs.1,50,000
(d) Share Application money pending allotment as Rs.6,00,000 and Other Current Liabilities of Rs.1,50,000

Answer : D

Question. Name different types of Share Capital.
Answer: (i) Authorised Share Capital. (ii) Issued Share Capital. (iii) Subscribed Share Capital. (iv) Called—up Share Capital. (v) Paid-up Share Capital. (vi) Reserve Capital.

Question. What is meant by Authorised Capital of a company?
OR
Give the meaning of ‘Registered Capital’ of a company.
Answer: This is the amount stated in the capital clause of the memorandum of association with which the Company was registfereld. It is the maximum amount which a company can raise during its lifetime.

Question. What is meant by Initial Public Offer?
Answer: Making an offer, inviting the public in general to subscribe for the shares is called as Initial Public Offer..

Question. What is meant by ‘Minimum Subscription?
Answer: ‘Minimum subscription’ refers to the minimum amount of capital that must be subscribed by the public before a company can proceed with allotment of shares. In general, it is \(90\%\) of the issue.

Question. At what rate interest on Calls-in-Advance may be paid by a ComPany according to Table F of Schedule I of the Companies Act,2013?
Answer: As per Table F of the Companies Act, 2013, Company IS required to pay interest @\(12\%\) p.a. from the date of receipt of Calls in advance to the due date of the Call.

Question. What is the maximum amount of discount at which forfeited shares can be re-issued?
Answer: If the forfeited shares are issued at a discount, the amount of discount must not exceed the amount received on them on their original issue.

Question. On 1 st April, 20 12, Vishwas Ltd. was formed with an authorised capital of \(\text{Rs. } 10,00,000\) divided into \(1,00,000\) equity shares of \(\text{Rs. } 10\) each. The Company issued prospectus inviting applications for \(90,000\) equity shares. The company received applications for \(85,000\) equity shares. During the first year, \(\text{Rs. } 8\) per share were called. Ram holding \(1,000\) shares and Shyam holding \(2,000\) shares did not pay the first call of \(\text{Rs. } 2\) per share; Shyam’s shares were forfeited after the first call and later on \(1,500\) of the forfeited shares were re-issued at \(\text{Rs. } 6\) per share, \(\text{Rs. } 8\) called up.
Show the following:
(a) Share Capital in the Balance Sheet of the company as per Schedule III Part I of the Companies Act, 2013.
(b) Also prepare ‘Notes to Accounts’ for the same.
Answer:
Balance Sheet of Vishwas Ltd. as at 31st March, 2013

Notes to Accounts:

Question. The authorised capital of Suhani Ltd. is \(\text{Rs. } 45,00,000\) divided into \(30,000\) shares of \(\text{Rs. } 150\) each. Out of these, company issued \(15,000\) shares of \(\text{Rs. } 150\) each at a premium of \(\text{Rs. } 10\) per share. The amount was payable as follows:
\(\text{Rs. } 50\) per share on application, \(\text{Rs. } 40\) per share on allotment (including premium), \(\text{Rs. } 30\) per share on first call and balance on final call. Public applied for \(14,000\) shares. All the money was duly received.
Prepare an extract of Balance Sheet of Suhani Ltd. as per Schedule III Part I of the Companies Act, 2013 disclosing the above information. Also prepare ‘Notes to Accounts’ for the same.
Answer:
Balance Sheet of Suhani Ltd.

Notes to Accounts:

Question. ‘Tractors India Ltd.’ is registered with an authorized capital of \(\text{Rs. } 10,00,000\) divided into \(1,00,000\) equity shares of \(\text{Rs. } 10\) each. The company issued \(50,000\) equity shares at a premium of \(\text{Rs. } 5\) per share. \(\text{Rs. } 2\) per share were payable with application, \(\text{Rs. } 8\) per share including premium on allotment and the balance amount on the first and final call. The issue was fully subscribed and all the amount due was received except the first and final call money on \(500\) shares allotted to Balaram.
Present the ‘Share Capital’ in the Balance Sheet of ‘Tractors India Ltd.’ as per Schedule III Part I of the Companies Act, 2013. Also prepare Notes to Accounts for the same.
Answer:
Balance Sheet of Tractors India Ltd. as at....... (As per Schedule III)

Notes to Accounts:

Question. What is meant by “Sweat Equity”. What are the conditions that must be fulfilled for issuing sweat equity?
Answer: Employees Stock Option ( also known as ‘ Sweat Equity’) means option granted by the company to its employee directors and employees to subscribe the shares at a price that is lower than the market price . It is an option or a right granted by the company but it is not an obligation on the employees to subscribe it. The employees may or may not exercise the option.

A company may issue stock ( shares ) options fulfilling the following conditions:
These shares are of the same class of shares already issued ;
It is authorised by a special resolution passed by the company ;
The resolution specifies the number of shares , the current market price , consideration , if any , and the class or classes of directors or employees to whom such equity shares are to be issued ;
Not less than one year has , at the date of issue , elapsed since the date on which the company had commenced business and;
These shares are issued in accordance with SEBI regulations, if the shares are listed.

Question. Shruti Ltd bought the business of Shinekey Ltd on 1-4-2007 consisting of sundry assets of \(\text{Rs. } 5,60,000\) and creditors of \(\text{Rs. } 1,00,000\) for a purchase consideration of \(\text{Rs. } 5,00,000\). \(\text{Rs. } 1,00,000\) was paid in cash and for the balance \(6\%\) Preference Shares were issued at a premium of \(25\%\). Pass necessary journal entries to record the above transaction.
Answer:
Journal Entries

Question. ‘India Auto Ltd.’ is registered with an authorised capital of \(\text{Rs. } 7,00,00,000\) divided into \(7,00,000\) shares of \(\text{Rs. } 100\) each. The company issued \(50,000\) shares to the vendor for building purchased and \(2,00,000\) shares were issued to the public. The amount was payable as follows:
On application and allotment — \(\text{Rs. } 20\) per share
On first call — \(\text{Rs. } 50\) per share
On second and final call — The balance
All calls were made and were duly received except on \(100\) shares held by Rajani, who failed to pay the second and final call. Her shares were forfeited.
Present the ‘Share Capital’ in the Balance Sheet of the company as per Schedule III Part I of the Companies Act, 2013. Also prepare ‘Notes to Accounts’.
Answer:
Balance Sheet of India Auto Ltd. as at...... (as per schedule III)

Notes to Accounts:

Question. Disco Ltd. granted options to subscribe its \(5,000\) Equity shares under Employees Stock Option Plan (ESOP) at \(\text{Rs. } 40\) each when the market price was \(\text{Rs. } 100\). Pass journal entries (Face value of share [sic: page] is \(\text{Rs. } 10\) each). The vesting period is \(3\) years.
Answer:
Journal of Disco Ltd.

Question. Events Ltd. has its share capital divided into shares of \(\text{Rs. } 10\) each. It granted \(10,000\) shares to its employees under Stock Options Plan at \(\text{Rs. } 40\), when the market price was \(\text{Rs. } 130\). The options were to be exercised within \(150\) days from the end of the vesting period of \(3\) years. The employees exercised their options for \(9,500\) shares only, the remaining options lapsed. Record the necessary journal entries in the books of accounts of the company.
Answer:
In the Books of Events Ltd.
Journal

Alternatively, a combined Journal entry may be passed in IV Year as follows:

Question. Pass Journal entries for the Forfeiture and Reissue in the following cases:
(a) P Lt.d- forfeited \(200\) shares of Ravi of \(\text{Rs. } 10\) each \(\text{Rs. } 8\) called-up, on which he had paid application and allotment money of \(\text{Rs. } 3\) per share. Out of these, \(100\) shares were reissued as fully paid-up for \(\text{Rs. } 8\) per share.
(b) R Ltd. forfeited \(600\) shares of \(\text{Rs. } 10\) each, on which first call of \(\text{Rs. } 3\) per share was not received; the second and final call of \(\text{Rs. } 2\) per share has not yet been called. Out of these, \(200\) shares were reissued as \(\text{Rs. } 8\) paid-up for \(\text{Rs. } 7\) per share.
Answer:
Journal Entries

Working Notes:
(1) Profit on \(200\) shares = \(\text{Rs. } 600\)
Hence, Profit on \(100\) shares = \(\frac{600 \times 100}{200} = \text{Rs. } 300\)
Less: Discount on reissue = \(100 \text{ shares} \times \text{Rs. } 2 = \text{Rs. } 200\)
Profit on reissue transferred to Capital Reserve = \(\text{Rs. } 100\)

(2) Profit on \(600\) shares = \(\text{Rs. } 3,000\)
Hence, Profit on \(200\) shares = \(\frac{3,000 \times 200}{600} = \text{Rs. } 1,000\)
Less: Discount on reissue = \(200 \text{ shares} \times \text{Rs. } 1 = \text{Rs. } 200\)
Profit on reissue transferred to Capital Reserve = \(\text{Rs. } 800\)

Question. Pass Journal Entries in the following cases:
(i) S Limited forfeited \(400\) shares of \(\text{Rs. } 10\) each, \(\text{Rs. } 6\) called up, issued to Mahesh on which he paid \(\text{Rs. } 4\) per share. Out of these \(240\) shares were reissued at \(\text{Rs. } 6\) per share to Suresh, \(\text{Rs. } 8\) paid up.
(ii) S Limited purchased assets of \(\text{Rs. } 7,60,000\) from Pandey Traders. It issued shares of \(\text{Rs. } 100\) each fully paid in satisfaction of purchase consideration.
Answer:
In the books of S Limited
Journal Entries

Question. VaibhaV Ltd. issued \(\text{Rs. } 5,00,000\) new capital divided into \(\text{Rs. } 50\) per share at a premium of \(\text{Rs. } 10\), payable as under:
on Applicatin - \(\text{Rs. } 5\) per share
On Allotment - \(\text{Rs. } 20\) per share (including premium of \(\text{Rs. } 5\) per share)
On First and Final Call - \(\text{Rs. } 35\) per share (including premium of \(\text{Rs. } 5\) per share)
Overpayments on application were to be applied towards sums due on allotment and first and final call. Where no allotment was made, money was to be refunded in full.
The issue was oversubscribed to the extent of \(13,000\) shares. Applicants for \(12,000\) shares were allotted only \(2,000\) shares and applicants for \(3,000\) shares were sent letters of regret. Shares were allotted in full to the remaining applicants. All the money due was duly received.
(i) Which value has been affected by rejecting the applications of the applicants who had applied for \(3,00,000\) [sic: \(3,000\)] shares?
(ii) Suggest a better alternative for the same.
(iii) Give journal entries to record the above transactions (including cash transactions) in the books of the company.
Answer:
(i) Value of equality has been affected by rejecting the applications of the retail investors from getting shares of the company.

(ii) The better alternative could have been to allot the shares proportionately to all the applicants so that such applicants may not be demotivated from investing in the capital of big companies in future.

(iii) Journal

Working Notes :
1. Total amount received on application = \(\text{Rs. } 5 \times 23,000 = \text{Rs. } 1,15,000\)
2. Pro-rata category = applied (\(12,000\)): Allotted (\(2,000\)) = \(6 : 1\)
    Money received on applications = \(12,000 \times \text{Rs. } 5 = \text{Rs. } 60,000\)
    Money required on applications = \(2,000 \times \text{Rs. } 5 = \text{Rs. } 10,000\)
    Excess money received on application = \(\text{Rs. } 50,000\)
    Money required on allotment = \(2,000 \times \text{Rs. } 20 = \text{Rs. } 40,000\)
So, entire amount due on allotment is already received. Excess of \(\text{Rs. } 10,000\) is transferred to calls-in-advance.

Question. Boquet Limited issued a prospectus inviting application for \(20,000\) shares of \(\text{Rs. } 20\) each at a premium of \(\text{Rs. } 4\) per share payable as follows.
On application \(\text{Rs. } 4\); on allotment \(\text{Rs. } 10\) (including premium); on first call \(\text{Rs. } 6\); on second and final call \(\text{Rs. } 4\).
Applications were received for \(30,000\) shares and pro rata allotment was made on the , applications for \(24,000\) shares. Money overpaid on applications was employed on account of sum due on allotment.
Rohit to whom \(400\) Shares were allotted, failed to pay the allotment money and on his subsequence failure to pay first call his shares were forfeited. Mohit, the holder of \(600\) shares, failed to pay the two calls and his‘ shares were forfeited after the second call. Of the shares forfeited, \(800\) shares were sold to karan credited as fully paid for \(\text{Rs. } 18\) per share, the whole of Rohit’s shares being included.
Show the Journal entries and the Balance Sheet.
Answer:
In the books of Boquet Ltd.
Journal

Working Notes:
Calculation of amount not paid by Rohit on allotment:
(a) Number of shares applied by Rohit:
\(400 \text{ shares allotted to applicants for } \frac{24,000}{20,000} \times 400 = 480 \text{ shares}\)
(b) Rohit paid only application money @ \(\text{Rs. } 4\) on \(480\) shares = \(\text{Rs. } 1,920\)
Less: Application money due on shares allotted (\(400 \times \text{Rs. } 4\)) = \(\text{Rs. } 1,600\)
Excess application money adjusted = \(\text{Rs. } 320\)
(c) Allotment money due on \(400\) shares @ \(\text{Rs. } 10\) = \(\text{Rs. } 4,000\)
Less: Excess money transferred from Share Application A/c (b) = \(\text{Rs. } 320\)
Amount not paid by Rohit on allotment = \(\text{Rs. } 3,680\)

2. Allotment money received = \(\text{Rs. } 2,00,000 - \text{Rs. } 16,000 - \text{Rs. } 3,680 = \text{Rs. } 1,80,320\)

3. It has been assumed that the entire excess of \(\text{Rs. } 320\) is exclusively for share capital and hence credited to share Forfeited Account.

4. The amount of \(\text{Rs. } 4,320\) transferred from Share Forfeited Account to Capital Reserve has been calculated as:
- Amount relating to shares of Rohit (\(480 \times \text{Rs. } 4\)): \(\text{Rs. } 1,920\)
  Less: Discount allowed on reissue (\(400 \times \text{Rs. } 2\)): \(\text{Rs. } 800 \rightarrow \text{Rs. } 1,120\)
- Amount relating to shares of Mohit (\(400 \times \text{Rs. } 10\)): \(\text{Rs. } 4,000\)
  Less: Discount allowed on reissue of \(400\) shares: \(\text{Rs. } 800 \rightarrow \text{Rs. } 3,200\)
Total: \(\text{Rs. } 4,320\)

Balance Sheet as at....

Notes to Accounts: