Accounting for Share Capital quiz

Securities premium cannot be used for:

The maximum amount of discount at which forfeited shares can be reissued is:

Under Table F, interest on calls in arrears is charged at a rate not exceeding:

Shares issued to employees or directors at a discount or for consideration other than cash for providing know-how are called:

Calls in advance are shown in the Balance Sheet under:

The part of the authorised capital that is offered to the public for subscription is called:

On forfeiture of shares issued at a premium, the Securities Premium Account is debited only if:

Capital Reserve arising on reissue of forfeited shares is shown under:

A company cannot proceed to allot shares unless it receives the minimum subscription, which is:

200 shares of Rs 10 each, Rs 8 called up, on which Rs 6 has been paid, are forfeited. The amount credited to Share Forfeiture Account is:

State any two features of a company. (2 marks)

What is oversubscription of shares? State two ways in which a company may deal with it. (2 marks)

What is private placement of shares? (2 marks)

What is reserve capital? How is it different from capital reserve? (2 marks)

Pass the journal entry for receipt of application money of Rs 3 per share on 10,000 shares. (2 marks)

What is an Employee Stock Option Plan? State one benefit to the company. (2 marks)

Why is Section 53 of the Companies Act, 2013 important while issuing shares? Name the exception to it. (2 marks)

How is the item Subscribed but not fully paid shown in the Notes to Accounts when calls in arrears exist? (2 marks)

Give the journal entry for reissue of forfeited shares at a discount. (2 marks)

Differentiate between preference shares and equity shares with respect to voting rights and dividend. (2 marks)

Arya Ltd issued 10,000 shares of Rs 10 each at a premium of Rs 5, payable Rs 4 on application, Rs 7 on allotment (including premium) and Rs 4 on call. All money was received except the call on 400 shares. Calculate the total amount received by the company and the calls in arrears. (3 marks)

Applications were received for 15,000 shares against 10,000 shares offered. Allotment was made pro rata. Application money is Rs 2 per share and allotment money is Rs 4 per share. Mr Raj applied for 600 shares. Calculate the number of shares allotted to him, his excess application money and the amount he must pay on allotment. (3 marks)

Kiran held 200 shares of Rs 10 each issued at a premium of Rs 3. She paid application money of Rs 2 per share but failed to pay allotment of Rs 6 (including premium) and the final call of Rs 5. Her shares were forfeited and later reissued at Rs 9 per share fully paid. Calculate the amount forfeited and the amount transferred to Capital Reserve. (3 marks)

A company issued 5,000 shares of Rs 10 each payable Rs 3 on application, Rs 3 on allotment, Rs 2 on first call and Rs 2 on second and final call. A holder of 100 shares paid the entire amount on allotment. Calculate the calls in advance at the time of allotment and the interest on calls in advance at 12% per annum if the first call was made 3 months after allotment and the final call 6 months after allotment. (3 marks)

Hari Ltd purchased assets of Rs 9,00,000 and took over liabilities of Rs 1,00,000 from Sohan Ltd for a purchase consideration of Rs 8,80,000, payable by issuing equity shares of Rs 100 each at a premium of 10%. Calculate the number of shares issued and the goodwill or capital reserve, if any. (3 marks)

Read the passage and answer the questions. Greenleaf Ltd, a solar panel maker in Gujarat, was registered with an authorised capital of Rs 50,00,000 divided into 5,00,000 equity shares of Rs 10 each. It issued 3,00,000 shares to the public payable in full on application. Applications were received for 2,80,000 shares and all of them were allotted. (i) State the amounts of issued and subscribed capital. (ii) Is this a case of oversubscription or undersubscription? Can the company proceed with allotment? Give a reason. (iii) Show how share capital will appear in the Notes to Accounts. (5 marks)

Read the passage and answer the questions. Sky Ltd issued 40,000 equity shares of Rs 10 each at a premium of Rs 2, payable Rs 2 on application, Rs 5 on allotment (including premium) and Rs 5 on call. Applications were received for 60,000 shares. Applicants for 10,000 shares were refused and the rest were allotted pro rata. Excess application money was adjusted towards allotment. (i) Calculate the excess application money adjusted on allotment. (ii) Calculate the amount received on allotment. (iii) Pass the journal entry for refund of application money. (5 marks)

Read the passage and answer the questions. Mr Sharma held 500 shares of Rs 10 each in Delta Ltd, issued at par. He paid Rs 3 on application and Rs 3 on allotment but did not pay the first and final call of Rs 4. The directors forfeited his shares and later reissued 300 of these shares to Ms Rao for Rs 8 per share fully paid. (i) Pass the journal entry for forfeiture. (ii) Pass the journal entry for reissue. (iii) Calculate the capital reserve and the balance left in the Share Forfeiture Account. (5 marks)

Read the passage and answer the questions. Vista Ltd wishes to raise Rs 2 crore to expand its plant. The board is debating whether to issue equity shares or preference shares. Equity shareholders expect higher returns but carry voting rights, while preference shareholders get a fixed dividend and priority in repayment of capital. (i) Give two reasons why the existing promoters may prefer issuing preference shares. (ii) Give two reasons why investors seeking control may prefer equity shares. (iii) Name two types of preference shares based on dividend and on convertibility. (5 marks)

Read the passage and answer the questions. Trident Ltd issued shares and some shareholders failed to pay calls, while one shareholder paid the final call in advance. The articles adopted Table F. The accountant credited the calls in advance to the Share Capital Account and did not charge any interest on calls in arrears. (i) Point out the error in the treatment of calls in advance. (ii) State the correct rate of interest on calls in advance and on calls in arrears under Table F. (iii) Is the company bound to charge interest on calls in arrears? Explain. (5 marks)

Draw a chart showing the classification of share capital. Show how share capital is presented in the Balance Sheet and in the Notes to Accounts of a company with authorised capital of Rs 10,00,000, issued capital of 60,000 shares of Rs 10 each, all subscribed and fully called, with calls in arrears of Rs 6,000. (6 marks)

Pass journal entries in prose form for the following: Ace Ltd issued 20,000 shares of Rs 10 each at a premium of Rs 2, payable Rs 3 on application, Rs 4 on allotment (including premium) and Rs 5 on first and final call. All shares were subscribed and all money received except the call on 500 shares. These shares were forfeited and reissued at Rs 8 per share fully paid. Draw a flowchart of the transactions. (6 marks)

Explain the treatment of oversubscription when (i) excess applications are rejected outright, (ii) shares are allotted on a pro-rata basis, and (iii) both methods are combined. Illustrate (iii) with your own example and pass the journal entries for application and allotment. (6 marks)

Explain forfeiture and reissue of shares originally issued at a premium when (i) the premium has been received and (ii) the premium has not been received. Pass the journal entries for each and draw a flowchart showing the movement of the Share Forfeiture Account balance. (6 marks)

Explain the uses and restrictions of Securities Premium under Section 52 of the Companies Act, 2013 and the prohibition on issue of shares at a discount under Section 53. Draw a chart contrasting issue at par, at premium and at discount (sweat equity) with one journal entry for each. (6 marks)