10. Amount received on application = ___________.
(a) Rs. 40,00,000 (b) Rs. 60,00,000 (c) Rs. 48,00,000 (d) Rs. 2,40,00,000
11. Application money adjusted against allotment = __________.
(a) Rs. 20,00,000 (b) Rs. 16,00,000 (c) Rs. 12,00,000 (d) Rs 8,00,000
12. Amount refunded to shareholders = __________.
(a) Rs. 20,00,000 (b) Rs. 16,00,000 (c) Rs. 12,00,000 (d) Rs. 8,00,000
13. Total amount paid by E = _________.
(a) Rs. 80,000 (b) Rs. 1,00,000 (c) Rs. 1,44,000 (d) Rs. 96,000
14. Total amount paid by F = ________.
(a) Rs. 80,000 (b) Rs. 3,00,000 (c) Rs. 4,20,000 (d) Rs. 1,44,000
15. Total amount paid by G = __________.
(a) Rs. 7,20,000 (b) Rs. 8,00,000 (c) Rs. 8,80,000 (d) Rs. 8,64,000
16. Amount transferred to Share forfeiture account at the time of forfeiting E’s shares =
_________.
(a) Rs. 80,000 (b) Rs. 1,00,000 (c) Rs. 3,00,000 (d) Rs. 96,000
17. Amount transferred to Share forfeiture account at the time of forfeiting F’s shares =
_________.
(a) Rs. 80,000 (b) Rs. 3,00,000 (c) Rs. 4,20,000 (d) Rs. 1,44,000
18. Net balance in Share Capital Account = ________.
(a) Rs. 2,00,00,000 (b) Rs. 2,08,00,000 (c) Rs. 2,04,00,000 (d) Rs. 1,98,00,000
19. Net balance in Securities Premium Account = ________.
(a) Rs. 39,20,000 (b) Rs. 39,28,000 (c) Rs. 39,36,000 (d) Rs. 39,44,000
20. Net balance in Share Forfeiture Account = ________.
(a) Rs. 1,00,000 (b) Rs. 3,00,000 (c) Rs. 96,000 (d) Rs. 3,96,000
21. Net balance in Capital Reserve Account = ________.
(a) Rs. 2,96,000 (b) Rs. 80,000 (c) Rs. 2,10,000 (d) Rs. 2,16,000
22. Net balance in Bank Account = ________.
(a) Rs. 2,40,00,000 (b) Rs. 2,40,12,000 (c) Rs. 2,40,24,000 (d) Rs. 2,40,36,000
23. Balance Sheet Total = _________.
(a) Rs. 2,40,00,000 (b) Rs. 2,40,12,000 (c) Rs. 2,40,24,000 (d) Rs. 2,40,36,000
24. When shares are forfeited, the share capital account is debited with ________ and the
share forfeiture account is credited with __________.
FUNDAMENTALS OF ACCOUNTING 9.51
Copyright -The Institute of Chartered Accountants of India
ISSUE, FORFEITURE AND REISSUE OF SHARES
(a) Paid-up capital of shares forfeited; Called up capital of shares forfeited
(b) Called up capital of shares forfeited; Calls in arrear of shares forfeited
(c) Called up capital of shares forfeited; Amount received on shares forfeited
(d) Calls in arrears of shares forfeited; Amount received on shares forfeited
Use the following information for the questions 25 to 29
B Ltd. issued 80,000 equity shares of Rs.10 each, payable as under:
On application Rs.3
On allotment Rs.4
On first call Rs.2
On final call Rs.1
The applications received for 1,20,000 shares were dealt with as under:
(cid:2) Applicants of 20,000 shares were allotted in full.
(cid:2) Applicants of 80,000 shares were allotted 60,000 shares pro-rata.
(cid:2) Applications for 20,000 shares were rejected.
25. Amount received on application is _____________.
(a) Rs. 2,40,000 (b) Rs. 3,60,000 (c) Rs. 5,60,000 (d) Rs. 8,00,000
26. Total excess money received as compared to the number of shares allotted = ?
(a) Rs. 3,00,000 (b) Rs. 2,40,000 (c) Rs. 3,60,000 (d) Rs. 1,20,000
27. Amount to be refunded = ?
(a) Nil (b) Rs. 60,000 (c) Rs. 1,20,000 (d) Rs. 1,80,000
28. Amount of excess application money available for adjustment against allotment
money = ?
(a) Nil (b) Rs. 60,000 (c) Rs. 1,20,000 (d) Rs. 1,80,000
29. Amount of excess application money available for adjustment against call money = ?
(a) Nil (b) Rs. 60,000 (c) Rs. 1,20,000 (d) Rs. 1,80,000
30. Which type of the following shares have the right to receive dividends unpaid in prior
years, whenever earnings become adequate?
(a) Cumulative preference shares (b) Participating preference shares
(c) Convertible preference shares (d) Callable preference shares
31. Which of the following statements is false?
(a) Interest on calls-in-advance is paid from the date of receipt of advance to the date of
relevant call
(b) Calls-in-advance are not entitled for any dividend
(c) According to Table A, interest on calls-in-advance is paid at the rate of 6% p.a.
(d) Payment of interest on calls-in-advance is at the discretion of the company
9.52 COMMON PROFICIENCY TEST
Copyright -The Institute of Chartered Accountants of India
32. T Ltd. proposed to issue 6,000 equity shares of Rs.100 each at a premium of 40%. The
minimum amount of application money to be collected per share as per the Companies
Act, 1956 = ?
(a) Rs.5.00 (b) Rs.6.00 (c) Rs.7.00 (d) Rs.8.40.
33. Dividends are usually paid as a percentage of ______.
(a) Authorized share capital (b) Net profit
(c) Paid-up capital (d) Called-up capital
34. E Ltd. had allotted 10,000 shares to the applicants of 14,000 shares on pro rata basis. The
amount payable on application is Rs.2. F applied for 420 shares. The number of shares
allotted and the amount carried forward for adjustment against allotment money due
from F = ?
(a) 60 shares; Rs.120 (b) 340 shares; Rs.160
(c) 320 shares; Rs.200 (d) 300 shares; Rs.240
35. O Ltd. issued 10,000 equity shares of Rs.10 each at a premium of 20% payable Rs.4 on
application (including premium), Rs.5 on allotment and the balance on first and final call.
The company received applications for 15,000 shares and allotment was made pro-rata.
P, to whom 3,000 shares were allotted, failed to pay the amount due on allotment. All his
shares were forfeited after the call was made. The forfeited shares were reissued to Q at
par. Assuming that no other bank transactions took place, the bank balance of the company
after effecting the above transactions = ?
(a) Rs.1,14,000 (b) Rs.1,32,000 (c) Rs.1,20,000 (d) Rs.1,00,000
36. A company forfeited 2,000 shares of Rs.10 each (which were issued at par) held by
Mr. John for non-payment of allotment money of Rs.4 per share. The called-up value per
share was Rs.9. On forfeiture, the amount debited to share capital = ?
(a) Rs.10,000 (b) Rs.8,000 (c) Rs.2,000 (d) Rs.18,000.
37. If forfeited shares (which were originally issued at a discount) are reissued at a premium,
the amount of such premium will be credited to ________.
(a) Share forfeiture account (b) Securities premium account
(c) Capital reserve account (d) Discount on issue of shares account
38. The maximum capital beyond which a company is not allowed to raise funds, by issue of
shares is its’ _____.
(a) Issued share capital (b) Reserve share capital
(c) Authorised share capital (d) Subscribed share capital
39. As per the SEBI guidelines, on issue of shares, the application money should not be less than
(a) 2.5% of the nominal value of shares
(b) 2.5% of the issue price of shares
(c) 25.0% of the nominal value of shares
(d) 25.0% of the issue price of shares
FUNDAMENTALS OF ACCOUNTING 9.53
Copyright -The Institute of Chartered Accountants of India
ISSUE, FORFEITURE AND REISSUE OF SHARES
40. G Ltd. acquired assets worth Rs.7,50,000 from H Ltd. by issue of shares of Rs.100 at a
premium of 25%. The number of shares to be issued by G Ltd. to settle the purchase
consideration = ?
(a) 6,000 shares (b) 7,500 shares (c) 9,375 shares (d) 5,625 shares
41. D Ltd. issued 5,000 equity shares of Rs.20 each at a premium of 20% payable Rs.8 on
application (including premium), Rs.10 on allotment and the balance on first and final
call. The company received applications for 7,500 shares and allotment was made pro-
rata. E, to whom 1,500 shares were allotted, failed to pay the amount due on allotment.
All her shares were forfeited after the call was made. The forfeited shares were reissued to
F at par. Assuming that no other bank transactions took place, the bank balance of the
company after affecting the above transactions = ?
(a) Rs.1,14,000 (b) Rs.1,31,000 (c) Rs.1,20,000 (d) Rs.1,00,000.
42. Declared dividend should be classified in the Balance Sheet as a _______.
(a) Provision (b) Current liability (c) Reserve (d) Current asset
43. The interest on calls-in-advance is paid for the period from the _______.
(a) Date of receipt of application money to the date of appropriation
(b) Date of receipt of allotment money to the date of appropriation
(c) Date of receipt of calls-in-advance to the date of appropriation of the call
(d) Date of appropriation to the date of dividend payment
44. As per Schedule VI of the Companies Act, 1956, under which of the following heads is
‘Premium on issue of Preference Shares’ shown in the balance sheet of a company?
(a) Miscellaneous expenditure (b) Debentures
(c) Reserves and surplus (d) Current liabilities and provisions
45. Which of the following signifies the difference between par value and an issue price below
par?
(a) Securities premium (b) Discount on issue of shares
(c) Calls in arrear (d) Calls in advance
46. The excess price received over the par value of shares, should be credited to
(a) Calls-in-advance account (b) Share capital account
(c) Reserve capital account (d) Securities premium account
47. The rate of discount on issue of shares can not exceed ——— percent of the nominal value
of the shares.
(a) 10 (b) 20 (c) 15 (d) 5
48. The Securities Premium Account should be shown under
(a) Share Capital (b) Current Liabilities
(c) Current Assets (d) Reserves and Surplus
9.54 COMMON PROFICIENCY TEST
Copyright -The Institute of Chartered Accountants of India
Use the following information for questions 49 and 50
Consider the following data pertaining to W Ltd. as on March 31, 2009
Share Capital
Issued, Subscribed Called-up (20,000 shares of Rs.100 each) Rs.20,00,000
Calls in arrear Rs. 10,000
Profit and loss account (Cr.) as on April 01, 2008 Rs. 67,000
Profit for the year Rs. 1,90,610
(cid:2) The company wants to create a Debenture Redemption Reserve and to transfer Rs.50,000
every year out of profits to redeem the debentures.
(cid:2) The company declared 10% dividends.
49. The amount of dividend declared = ?
(a) Rs.1,00,700 (b) Rs.2,25,761 (c) Rs.1,99,000 (d) Rs.2,00,000
50. The balance of Profit and Loss Appropriation account transferred to Balance Sheet after
effecting the above transactions = ?
(a) Rs.6,000 (b) Rs.68,100 (c) Rs.8,610 (d) Rs.6,810
51. If the forfeited shares are issued at a premium, the amount of the premium shall be credited
to
(a) Profit and loss account (b) Capital reserve account
(c) Share forfeiture account (d) Securities premium account
52. IJK Ltd. issued 20,000 shares of Rs.10 each at a premium of 20% on May 01, 2009, payable
as follows:
On application Rs.4.50 (inclusive of premium)
On allotment Rs.2.50
On first and final call Rs.5.00
Mrs. M, to whom 1,000 shares were allotted, has paid Rs.5,000 on June 01, 2009. At the
time of remitting the allotment money, she indicated that the excess money should be
adjusted towards the call money. The directors of the company made the first and final
call on October 31, 2009. The company has a policy of paying interest on calls-in-advance.
The amount of interest paid to Mrs. M on calls-in-advance = ?
(a) Rs.62.50 (b) Rs.52.08 (c) Rs.125.00 (d) Rs.150.00
53. The following information pertains to X Ltd.
i. Equity share capital called up Rs.5,00,000 ii. Calls in arrear Rs. 40,000
iii. Calls in advance Rs. 25,000 iv. Proposed dividend 15%
The amount of dividend payable = ?
(a) Rs.75,000 (b) Rs.72,750 (c) Rs.71,250 (d) Rs.69,000
FUNDAMENTALS OF ACCOUNTING 9.55
Copyright -The Institute of Chartered Accountants of India
ISSUE, FORFEITURE AND REISSUE OF SHARES
54. Z Ltd. issued 10,000 shares of Rs.10 each. The called up value per share was Rs.8. The
company forfeited 200 shares of Mr. A for non-payment of 1st call money of Rs.2 per
share. He paid Rs.6 for application and allotment money. On forfeiture, the share capital
account will be _________.
(a) Debited by Rs.2,000 (b) Debited by Rs.1,600
(c) Credited by Rs.1,600 (d) Debited by Rs. 1,200
55. B Ltd. issued shares of Rs.10 each at a discount of 10%. Mr. C purchased 30 shares and
paid Rs.2 on application but did not pay the allotment money of Rs.3. If the company
forfeited his entire shares, the forfeiture account will be credited by ______.
(a) Rs.90 (b) Rs.81 (c) Rs.60 (d) Rs.54
Use the following information for questions 56 and 57
B Ltd. invited applications for 5,000 shares of Rs.10 each at a premium of Rs.2 per share
payable as follows:
On application – Rs.5 (including premium)
On allotment – Rs.4
On final call – Rs.3
Allotment was made on pro rata basis to the applicants of 6,000 shares. Mr. C to whom 60
shares were allotted, failed to pay allotment money and call money. Mr. D the holder of 100
shares, failed to pay call money. All these shares were forfeited after proper notice.
56. On forfeiture, the amount credited to share allotment account = ?
(a) Rs.480 (b) Rs.640 (c) Rs.180 (d) Rs.400
57. On forfeiture, the amount credited to share forfeiture account = ?
(a) Rs.300 (b) Rs.880 (c) Rs.320 (d) Rs.940.
58. Which of the following statements is false?
(a) Shares can be issued for cash or any other consideration
(b) In the event of over subscription, excess amount has to be refunded or a pro rata
allotment is to be made
(c) A company must receive a minimum of 90% subscription against the entire issue as
per the SEBI guidelines.
(d) The share application money is automatically converted to share capital.
59. A company invited applications for 25,000 equity shares of Rs. 10 each and received 30,000
applications along with the application money of Rs.4 per share. Which of the following
alternatives can be followed?
I. Refund the excess applications.
II. Make pro rata allotment to all the applicants, and refund the excess application money.
9.56 COMMON PROFICIENCY TEST
Copyright -The Institute of Chartered Accountants of India
III. Not to allot any shares to some applicants, full allotment to some of the applicants
and pro rata allotment to the rest of the applicants.
IV. Not to allot any shares to some applicants and make pro rata allotment to other
applicants.
V. Make pro rata allotment to all the applicants and adjust the excess money received
towards call money.
(a) Only (II) above (b) Both (I) and (IV) above
(c) All (I), (II), (III), (IV) and (V) above (d) Only (III) above
60. The document inviting offers from public to subscribe for the debentures or shares or
deposits of a body corporate is known as _____.
(a) Share certificate (b) Stock invest
(c) Fixed deposit receipt (d) Prospectus
61. As per Schedule VI of the Companies Act, 1956, forfeited shares account will be ______.
(a) Added to paid-up capital (b) Deducted from paid-up capital
(c) Shown as a capital reserve (d) Shown as a revenue reserve
62. The authorized capital of M Ltd. consists of both cumulative preference shares and equity
shares. Each 5% cumulative preference share has a par value Rs.100. Each equity share
has a par value Rs.10. At the end of the year 2007-08 and 2008-09, the cumulative
preference share capital balance was Rs.2,00,000 and the equity share capital balance
was Rs.5,00,000.
If dividend declarations totalled Rs.8,000 and Rs.15,000 in the year 2007-08 and 2008-09
respectively, the dividends allocated to the equity share holders in the year 2008-09 = ?
(a) Rs.3,000 (b) Rs.5,000 (c) Rs.10,000 (d) Rs.12,000
63. At the time of forfeiture of shares which were originally issued at a discount, the accounting
entry involves __________.
I. A debit to Share capital account with the called-up value of shares forfeited
II. A credit to Share forfeiture account with the amount received on forfeited shares
III. A credit to Discount on issue of shares with the amount of discount allowed on forfeited
shares
IV. A credit to Calls-in-arrears with the amount due but not paid on forfeited shares
(a) Both (I) and (IV) above (b) Both (IV) and (III above
(c) Both (I) and (II) above (d) (I), (II), (III) and (IV) above.
64. As per The Companies Act, only preference shares, which are redeemable within ____
can be issued.
(a) 24 years (b) 22 years (c) 30 years (d) 20 years
FUNDAMENTALS OF ACCOUNTING 9.57
Copyright -The Institute of Chartered Accountants of India
ISSUE, FORFEITURE AND REISSUE OF SHARES
65. Which of the following is not true?
(a) Loss on reissue of shares cannot be more than the gain on forfeiture of those shares
(b) Where all the forfeited shares are not reissued the share forfeited account will show a
credit balance equal to gain on forfeiture of shares not yet re-issued
(c) When the shares are forfeited, securities premium is debited along with share capital
where premium has not been received
(d) Where forfeited shares are re-issued at premium, the amount of such premium is
credited to capital reserve account.
66. The subscribed share capital of S Ltd. is Rs.80,00,000 of Rs.100 each. There were no calls
in arrear till the final call was made. The final call made was paid on 77,500 shares. The
calls in arrear amounted to Rs.62,500. The final call per share = ?
(a) Rs.25 (b) Rs.7.80 (c) Rs.20 (d) Rs.62.50
67. Which of the following should be deducted from the called-up share capital to find out
paid-up capital?
(a) Calls-in-advance (b) Calls-in-arrears
(c) Share forfeiture (d) Discount on issue of shares
68. If a shareholder does not pay his dues on allotment, for the amount due, there will be a
________.
(a) Credit balance in the share allotment account
(b) Debit balance in the share forfeiture account
(c) Credit balance in the share forfeiture account
(d) Debit balance in the share allotment account
69. The discount allowed on re-issue of forfeited shares is debited to __________.
(a) General reserve account (b) Capital reserve account
(c) Revaluation reserve account (d) None of these.
70. Maximum amount that can be collected as premium as a percentage of face value = ?
(a) 20%. (b) 30% (c) 40%. (d) Unlimited
71. The company issued shares of Rs.10 each at a premium of Rs.2 payable as:
On application –– Rs.3
On allotment –– Rs.4 (including premium)
On first call –– Rs.3
On second and final call –– Rs.2
Mr. E who holds 100 shares failed to pay the first call money. The company has forfeited
the 100 shares after the first call. On forfeiture, the amount debited to share capital
account = ?
(a) Rs.1,200 (b) Rs.1,000 (c) Rs.800 (d) Rs.700
9.58 COMMON PROFICIENCY TEST
Copyright -The Institute of Chartered Accountants of India
Use the following information for questions 72 and 73
D Ltd. issued 10,000 equity shares of Rs.10 each at a premium of 20%. The share amount was
payable as:
On application Rs.2
On allotment (including premium) Rs.5
On first call Rs.3
On second and final call Rs.2
Applications were received for 14,000 shares and the shares were allotted to applicants on
pro-rata basis. E, who was allotted 300 shares, failed to pay the first call. On his subsequent
failure to pay the second and final call, all his shares were forfeited. Out of the forfeited
shares, 200 shares were re-issued @ Rs.9 per share.
72. The amount transferred to capital reserve = ?
(a) Rs.200 (b) Rs.1,100 (c) Rs.800 (d) Rs.1,300
73. Balance in share forfeiture accounts = ?
(a) Rs.Nil (b) Rs.700 (c) Rs.500 (d) Rs.400
74. 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 a fixed amount in every financial year
75. The Securities Premium amount may be utilized by a company for __________.
(a) Writing off any loss on sale of fixed asset
(b) Writing off any loss of revenue nature
(c) Payment of dividends
(d) Writing off the expenses/discount on the issue of debentures
FUNDAMENTALS OF ACCOUNTING 9.59
Copyright -The Institute of Chartered Accountants of India
ISSUE, FORFEITURE AND REISSUE OF SHARES
ANSWERS
1. (d) 2. (a) 3. (b) 4. (b) 5. (a)
6. (b) 7. (c) 8. (d) 9. (d) 10. (b)
11. (d) 12. (c) 13. (d) 14. (c) 15. (a)
16. (d) 17. (b) 18. (d) 19. (a) 20. (a)
21. (d) 22. (d) 23. (d) 24. (c) 25. (b)
26. (d) 27. (b) 28. (b) 29. (a) 30. (a)
31. (d) 32. (a) 33. (c) 34. (d) 35. (b)
36. (d) 37. (b) 38. (c) 39. (d) 40. (a)
41. (b) 42. (b) 43. (c) 44. (c) 45. (b)
46. (d) 47. (a) 48. (d) 49. (c) 50. (c)
51. (d) 52. (a) 53. (d) 54. (b) 55. (c)
56. (c) 57. (d) 58. (d) 59. (c) 60. (d)
61. (a) 62. (a) 63. (d) 64. (d) 65. (d)
66. (a) 67. (b) 68. (d) 69. (d) 70. (d)
71. (c) 72. (c) 73. (c) 74. (d) 75. (d)
9.60 COMMON PROFICIENCY TEST
Copyright -The Institute of Chartered Accountants of India
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