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ACCOUNTANCY – XII
CHAPTER-5
COMPANY ACCOUNTS – ACCOUNTING FOR SHARE CAPITAL
Time : 1 Hr. M.M. : 40

Q.1. Nominal Capital is

(a) That part of authorised capital which is issued by the company.
(b) The amount of capital which is actually applied by prospective
shareholders.
(c) The amount of capital which is paid by the shareholders.
(d) The maximum amount of share capital that a company is
authorised to issue.
Q.2. Which of the following statements is correct in the context of share capital?
(a) Authorised Capital is always more than the Issued Capital.
(b) Issued Capital is always equal to Authorised Capital.
(c) Authorised Capital can be more or equal but cannot be less than
Issued Capital.
(d) Issued Capital is independent of Authorised Capital.
Q.3. Which of the following statements is correct in the context of share capital?
(a) Issued Capital can be more than or equal to Subscribed Capital.
(b) Issued Capital and Subscribed Capital are always same.
(c) Issued Capital is always more than Subscribed Capital.
(d) Subscribed Capital is always more than Issued Capital.
Q.4. Subscribed capital is
(a) That part of authorised capital which is issued to the public for
subscription.
(b) That part of issued capital which has been actually subscribed by
the public.

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(c) That part of subscribed 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.
Q.5. Subscribed and Fully Paid-up Share Capital is
(a) Total Issue Price of the Share is called-up.
(b) Total Nominal (Face) value of the share is called-up.
(c) Total Nominal (Face) value of the share is called-up and also
received.
(d) Total Nominal (Face) value of the share is called-up whether received
or not.
Q.6. Subscribed But not Fully Paid-up Share Capital is
(a) Total Nominal (Face) value of the Share is either not called-up or
received by the company.
(b) Total Nominal (Face) value of the share is not called-up.
(c) Total Issue Price of the share is called-up and also received
(d) Total Issue Price of the share is not called-up but is received.
Q.7. If shares are oversubscribed, the company can issue shares
(a) On pro rata basis to all the applicants.
(b) By rejecting some of the applications, accepting in full to some of the
applications and allotting on pro rata basis to the remaining.
(c) by rejecting some of the applications and accepting in full the
remaining applications.
(d) All of the above.
Q.8. 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).

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Q.9. Which of the following is a purpose for which Securities Premium Reserve can
be used?
(a) For providing Premium on Redemption of Debentures and
Preference Shares.
(b) For issuing shares to the promoters as ESOPs.
(c) For payment of Preference Dividend.
(d) For writing off expenses other than Preliminary Expenses.
Q.10. At the time when shares are forfeited, Share Capital Account is debited with
(a) The amount of nominal (face) value of shares.
(b) The amount called-up on the shares forfeited till the date of
forfeiture.
(c) Paid-up value of shares as on the date of forfeiture.
(d) Market value of shares as on the date of forfeiture of shares.
Q.11. Apple Orchards Ltd. issued 2,00,000 Equity Shares of Rs. 10 each at par
payable Rs. 4 on application, Rs. 3 or allotment and balance as first and final
call. It received Rs. 6,80,000 as Application Money.
The amount that it should receive on Allotment will be
(a) Rs. 6,00,000 (b) Rs. 5,10,000
(c) Rs. 5,55,000 (d) Nil
Q.12. Fitness India Ltd. had issued 10,000 shares of Rs. 10 each at a premium of
Rs. 2 and had called-up the issue price to be paid. It forfeited 1,000 Equity
Shares of Rs. 10 on which it had received Rs. 4,000.
The company reissued these forfeited shares as fully paid-up for Rs. 5 per
share. Is the company correct in doing so?
(a) Yes, the company is correct because it can issue forfeited shares at
any value.
(b) No, the company is not correct because it can reissue these
forfeited shares for Rs. 6 since Rs. 4 have been forfeited.
(c) No, the company is not correct because it can reissue these forfeited
shares at Rs. 10, it being the nominal (face) value.
(d) No, company is not correct because it can reissue these forfeited
shares at Rs. 12, it being the issue price.

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Q.13. If a share of Rs. 10 issued at a premium of Rs. 2 on which the total amount of
issue price has been called and Rs. 8 (including premium) paid is forfeited,
Share Capital Account will be debited by
(a) Rs. 12 (b) Rs. 10
(c) Rs. 8 (d) Rs. 6
Q.14. First Call amount received in advance from the shareholders before it is
called-up is
(a) Debited to Call-in-Advance Account.
(b) Credited to Share Allotment Account.
(c) Debited to first call amount.
(d) Credited to Call-in-Advance Account.
Q.15. If discount on reissue of shares is less than the amount forfeited, the surplus
is transferred to
(a) Capital Reserve (b) Reserve Capital
(c) Securities Premium Reserve
(d) Statement of Profit and Loss
Q.16. If a share of nominal (face) value Rs. 10 issued at a premium of Rs. 2 per
share payable alongwith final call of Rs. 3, on which Rs. 7 paid-up against Rs.
12 called-up is forfeited and is reissued, it can be reissued at least for
(a) Rs. 10 (b) Rs. 7
(c) Rs. 3 (d) Rs. 12
Q.17. Mango Tree Ltd. had issued 90,000 Equity Shares of Rs. 10 each and it had
called the total nominal (face) value. It had received the total amount except
the final call of Rs. 3 on 5,000 Equity Shares. These 5,000 Equity Shares will
be shown as
(a) Subscribed and Fully Paid-up
(b) Subscribed but not Fully Paid-up
(c) Issued share capital
(d) None of these

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Q.18. Blue Berry Ltd. had issued 50,000 Equity Shares of Rs. 20 each and had
called-up Rs. 16 but received Rs. 10 per share, Equity Share Capital Account
will be credited by
(a) Rs. 20 per share (b) Rs. 16 per share
(c) Rs. 14 per share (d) Rs. 2 per share
Q.19. Fortune Ltd. forfeited 2,000 shares of Rs. 10 each (which were issued at par)
held by Naresh for non-payment of allotment money of Rs. 4 per share. The
called-up value per share was Rs. 9. On forfeiture, Share Capital Account will
be debited by
(a) Rs. 10,000 (b) Rs. 8,000
(c) Rs. 2,000 (d) Rs. 18,000
Q.20. Gold Leaf Ltd. had allotted 10,000 shares to the applicants of 14,000 shares
on pro rata basis. The amount payable on application was Rs. 2 per share.
Mohan had applied for 420 shares. The number of shares allotted and the
amount carried forward for adjustment against allotment money due from
Mohan are
(a) 60 shares, Rs. 120 (b) 320 shares, Rs. 200
(c) 340 shares, Rs. 100 (d) 300 shares, Rs. 240
Q.21. Super Seat Ltd. issued 1,00,000 equity shares of Rs. 10 each at a premium of
Rs. 2 per share. Harleen, who was allotted 2,000 shares did not pay first and
final call of Rs. 5 per share. On forfeiture of Harleen's shares, Securities
Premium Reserve Account will be debited by
(a) Rs. 5,000 (b) Rs. 10,000
(c) Rs. 15,000 (d) NIL
Q.22. Lemon Tree Ltd. issued 40,000 Equity Shares of Rs. 10 each at par payable
Rs. 3 on Application; Rs. 4 on Allotment and Balance on First and Final Call.
Applications were received for 1,10,000 shares. Applications for 20,000
shares were refused allotment and pro rata allotment was made to the
remaining applicants. Amount received and refunded on allotment is
(a) Rs. 1,00,000 and Nil.
(b) Rs. 10,000 and Rs. 60,000
(c) Nil and Rs. 1,00,000
(d) Nil and Rs. 10,000

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Q.23. Mango Tree Ltd. issued 50,000 Equity Shares of Rs. 10 each at par for
subscription payable Rs. 3 on Application, Rs. 4 on Allotment and Rs. 3 as
First and Final Call.
It received applications for 1,45,000 Equity Shares. Applicants for 20,000
Equity Shares were refused allotment and remaining applicants were allotted
shares on pro rata basis. The amount that the company will receive as
Allotment Money and / or refund will be
(a) Rs. 2,25,000 and Rs. 25,000
(b) Rs. 25,000 and Rs. 25,000
(c) Rs. 1,75,000 and Rs. 25,000
(d) Nil and Rs. 25,000
Q.24. Mango Tree Ltd. issued 50,000 Equity Shares of Rs. 10 each at par for
subscription payable Rs. 3 on Application, Rs.4 on Allotment and Rs. 3 as
First and Final Call.
It received applications for 1,45,000 Equity Shares. Applicants for 20,000
Equity Shares were refused allotment and remaining applicants were allotted
shares on pro rata basis. The amount that the company credits to Calls-in-
Advance Account will be
(a) Rs. 2,25,000 (b) Rs. 25,000
(c) Rs. 1,75,000 (d) Nil
Q.25. Teak Tree Ltd. issued 20,000 Equity Shares of Rs. 10, each at par for
subscription payable Rs. 3 on application, Rs. 3 on allotment and balance as
First and Final Call.
Applications were received for 65,000 Equity Share. Applications for 15,000
Equity Shares were rejected and pro rata allotment was made to the
remaining applicants for 50,000 Equity Shares. The amount that the company
will receive as First and Final Call, if the excess Application Money is adjusted
against the Allotment and First and Final Call, will be
(a) Rs. 80,000 (b) Rs. 50,000
(c) Rs. 30,000 (d) Nil

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Q.26. Oak Tree Ltd. issued 50,000 Equity shares of Rs. 10 each at par for
subscription payable as Application Money Rs. 4; On Allotment Rs. 3 and
balance as First and Final Call. Applications were received for 2,00,000 Equity
Shares. Applications for 50,000 shares were rejected and pro rata allotment
was made to the remaining applicants. Excess Application Money was to be
adjusted against Allotment and also Call. The amount that the company will
transfer to Calls-in-Advance Account and total Application Money it will refund
will be
(a) Rs. 2,50,000 and Rs. 1,50,000
(b) Rs. 1,50,000 and Rs. 3,00,000
(c) Nil and Rs. 1,00,000
(d) Rs. 1,50,000 and Rs. 1,50,000
Q.27. Cedar Tree Ltd. issued 1,00,000 Equity shares of Rs. 10 each at a premium
of Rs. 2 per share for subscription payable as Application Money Rs. 4; On
Allotment Rs. 5 and balance as First and Final Call. Applications were
received for 2,00,000 Equity Shares. Applications for 50,000 shares were
rejected and pro rata allotment was made to the remaining applicants. Excess
Application Money was to be adjusted against Allotment and also Call. The
amount that the company will receive on allotment and amount that it will
refund will be
(a) Rs. 2,50,000 and Rs. 2,00,000
(b) Rs. 1,50,000 and Rs. 2,00,000
(c) Rs. 5,00,000 and Rs. 2,00,000
(d) Rs. 3,00,000 and Rs. 2,00,000
Q.28. Kikar Tree Ltd. issued for subscription 10,000 Equity Shares of Rs. 10,000
Equity Shares of Rs. 10 each at par. The Issue price was payable Rs. 4 per
share on application, Rs. 3 per share on allotment and Rs. 3 per share as first
and final call. The issue was oversubscribed three times. The company issued
shares to the applicants as follows:
(i) Applications for 3,000 Equity Shares were rejected
(ii) 4,000 Equity Shares were allotted to applicants of 12,000 Equity
Shares.
(iii) 6,000 Equity Shares were allotted to applicants of 15,000 Equity
Shares.

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The amount that the company should receive on allotment and as first and
final call will be
(a) Nil and Rs. 10,000 respectively.
(b) Nil and Rs. 20,000 respectively.
(c) Nil and Rs. 30,000 respectively.
(d) Nil and Rs. 40,000 respectively.
Q.29. Willow Tree Ltd. issued for subscription 20,000 Equity Shares of Rs. 10 each.
The Issue price was payable Rs. 4 per share on application, Rs. 5 per share
on allotment and Rs. 3 per share as first and final call. The issue was
oversubscribed by one time. The company issued shares to the applicants as
follows:
(i) Applications for 8,000 Equity Shares were rejected
(ii) 8,000 Equity Shares were allotted to applicants of 12,000 Equity
Shares.
(iii) 12,000 Equity Shares were allotted to applicants of 20,000 Equity
Shares.
The amount that the company should receive on allotment and as first and
final call will be
(a) Rs. 52,000 and Rs. 60,000 respectively.
(b) Rs. 1,00,000 and Rs. 60,000 respectively.
(c) Rs. 52,000 and Rs. 96,000 respectively.
(d) Nil and Rs. 60,000 respectively.
Q.30. Peepal Tree Ltd. issued 1,00,000 Equity shares of Rs. 10 each at par for
subscription payable as Application Money Rs. 4; On Allotment Rs. 3 and
balance as First and Final Call. Applications were received for 4,00,000 Equity
Shares. Applications for 2,00,000 shares were rejected and pro rata allotment
was made to the remaining applicants. Excess Application Money was to be
adjusted against Allotment and also Call. Allotment Money and call Money
was duly received.
The amount that the company will transfer to Call-in-Advance Account and
amount that it will receive as First and Final Call will be
(a) Nil and Rs. 2,00,000 (b) Rs. 2,00,000 and Nil

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(c) Rs. 1,00,000 and Rs. 2,00,000

(d) Nil and Rs. 3,00,000
Q.31. Jamun Tree Ltd. issued 1,00,000 Equity Shares of Rs. 10 each at par for
subscription payable as Application Money Rs. 4; On Allotment Rs. 3 and
balance as First and Final Call. Applications were received for 4,00,000 Equity
Shares. Applications for 2,00,000 shares were rejected and pro rata allotment
was made to the remaining applicants. Allotment Money and Call Money was
duly receive.
The amount that the company will transfer to Calls-in-Advance Account and
amount that it will receive as Fist and Final Call will be
(a) Nil and Rs. 2,00,000 (b) Rs. 2,00,000 and Nil
(c) Rs. 1,00,000 and Rs. 2,00,000
(d) Rs. Nil and Rs. 3,00,000
32. Apple Tree Ltd. issued 1,00,000 Equity shares of Rs. 10 each at a premium of
Rs. 2 per share for subscription payable as Application Money Rs. 4; On
Allotment Rs. 3 and balance including premium as First and Final Call.
Applications were received for 4,00,000 Equity Shares. Applications for
2,00,000 shares were rejected and pro rata allotment was made to the
remaining applicants. Excess Application Money was to be adjusted against
Allotment and also Call. Allotment Money and Call Money was duly received.
The amount that the company will transfer to Call-in-Advance Account and
amount that it will receive as First and Final Call will be
(a) Rs. 1,00,000 and Rs. 4,00,000
(b) Rs. 1,00,000 and Rs. 5,00,000
(c) Rs. 1,00,000 and Rs. 2,00,000
(d) Rs. 1,00,000 and Rs. 3,00,000
Q.33. Lemon Tree Ltd. issued 1,00,000 Equity shares of Rs. 10 each at a premium
Rs. 2 per share for subscription payable as Application Money Rs. 6
(including Premium); on Allotment Rs. 3 and balance as First and Final Call.
Applications were received for 4,00,000 Equity Shares. Applications for
2,00,000 shares were rejected and pro rata allotment was made to the
remaining applicants. Excess Application Money was to be adjusted against
Allotment and also Call. Allotment Money and Call Money was duly received.

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The amount that the company will receive as Allotment Money, the amount
that the company will transfer to Calls-in-Advance Account and the amount
that it will receive as First and Final Call will be
(a) Nil, Rs. 2,00,000 and Nil
(b) Nil, Rs. 3,00,000 and Nil
(c) Nil, Rs. 3,00,000 and Rs. 2,00,000
(d) Nil, Rs. 3,00,000 and Rs. 1,00,000
Q.34. Sandalwood. Tree Ltd. issued 1,00,000 Equity Shares of Rs. 10 each at a
premium of Rs. 2 per share for subscription payable as Application Money Rs.
5 and balance on allotment. Applications were received for 3,00,000 Equity
Shares. Applications for 1,00,000 shares were rejected and pro rata allotment
was made to the remaining applicants.
The amount due, if any as Allotment Money, was duly received. The amount
that the company will receive as Allotment Money will be
(a) Rs. 2,00,000 (b) Rs. 3,00,000
(c) Rs. Nil (d) Rs. 1,00,000
Q.35. Bamboo Tree Ltd. issued 50,000 Equity shares of Rs. 10 each at a premium
of Rs. 2 per share for subscription payable as Application Money Rs. 5
(Including Premium) and balance on allotment. Applications were received for
3,00,000 Equity Shares. Applications for 2,25,000 shares were rejected and
pro rata allotment was made to the remaining applicants.
The amount due, if any as Allotment Money, was duly received. The amount
that the company will transfer to Securities Premium Reserve and receive as
Allotment Money will be
(a) Rs. 6,00,000, Rs. 2,75,000
(b) Rs. 1,00,000, Rs. 4,75,000
(c) Rs. 1,00,000, Rs. 2,25,000
(d) Rs. 1,00,000, Rs. 3,75,000

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Q.36. Bharat Earth Ltd. issued 40,000 equity shares of Rs. 20 each payable as Rs.
5 on application; Rs. 7 on allotment and Rs. 8 on first and final call. Company
received the due amount but Akhil holding 250 shares did not pay the
allotment money and call money and Shammi holding 150 shares did not pay
the amount due on call. Total amount of Calls-in-Arrears is
(a) Rs. 1,750 (b) Rs. 3,200
(c) Rs. 6,000 (d) Rs. 4,950
Q.37. Divya Ltd. forfeited 7,000 equity shares Rs. 100 each issued at a premium of
10% for non-payment of first and final call of Rs. 40 per share. The maximum
amount of discount at which these shares can be reissued will be:
(a) Rs. 2,80,000 (b) Rs. 4,20,000
(c) Rs. 4,90,000 (d) Rs. 3,50,000
Q.38. Palm Tree Ltd. had forfeited 35,000 Equity Shares of Rs. 10 each that were
issued at a premium of Rs. 3 per share, for non-payment of First and Final
Call of Rs. 3 per share. The minimum reissue price of these shares can be
(a) Rs. 3,50,000 (b) Rs. 4,20,000
(c) Rs. 1,05,000 (d) Rs. 3,15,000
Q.39. Ashoka Tree Ltd. forfeited 1,000 Shares of Rs. 10 each on which the
shareholder had paid only the application money of Rs. 3 per share. Out of
these, 400 Equity Shares were reissued as fully paid for Rs. 9 per share. The
gain on reissue is
(a) Rs. 3,000 (b) Rs. 1,200
(c) Rs. 800 (b) None of these
Q.40. On forfeiture of 100 shares of Rs. 50 each, Rs. 2,500 were credited to Share
Forfeited Account. These shares were reissued at Rs. 25 per share fully paid-
up. The amount credited to 'Capital Reserve Account' will be
(a) Rs. 2,500 (b) Rs. 5,000
(c) No amount (d) Rs. 3,000

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Q.41. Pawan Hans. Ltd. forfeited 40 shares of Rs. 10 each issued at a premium of
40% of Raj who had applied for 48 shares. After having paid Rs. 6 (including
Rs. 2 premium), he did not pay allotment money of Rs. 2 (including Rs. 1
premium) and on his subsequent failure to pay the first call of Rs. 3 (including
Rs. 1 premium) his shares were forfeited. The amount to be credited to
Forfeited Shares Account is
(a) Rs. 288 (b) Rs. 200
(c) Rs. 192 (d) Rs. 160
Q.42. Ashoka Tree Ltd. had issued 10,000 Equity Shares of Rs. 10 each at a
premium of Rs. 2. It had called the total issue price of the share. Few
shareholders had not paid the First and Final Call of Rs. 3 and their shares
were forfeited. On forfeiture, Share Capital Account will be debited by
(a) Rs. 10 per share (b) Rs. 12 per share
(c) Rs. 7 per share (d) Rs. 3 per share
Q.43. Banyan Tree Ltd. had forfeited 10,000 Equity Shares of Rs. 10 each that were
issued at a premium of Rs. 5 per share for non-payment of Allotment Money
of Rs. 5 per share plus premium. Application Money was Rs. 5 per share. On
forfeiture, it will debit Share Capital Account and Securities Premium Reserve
by
(a) Rs. 50,000 and Rs. 50,000 respectively.
(b) Rs. 1,00,000 and Rs. 25,000 respectively
(c) Rs. 1,00,000 and Rs. 50,000 respectively.
(d) Rs. 1,00,000 and Nil respectively.
Q.44. Which of the following statement does not relate to 'Reserve Capital'?
(a) It is part of uncalled capital of a company.
(b) It cannot be used during the lifetime of a company.
(c) It can be used for writing off capital losses.
(d) It is part of subscribed capital.
Q.45. Reserve Capital is not a part of
(a) Authorised Capital (b) Subscribed Capital
(c) Unsubscribed Capital (d) Issued Capital
Q.46 The Directors of Neelkamal Ltd. forfeited 70,000 equity shares of Rs. 10 each,
Rs. 10 called-up, for non-payment of final call of Rs. 1 per share. Half of the

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forfeited shares were reissued at Rs. 20 per share Fully Paid-up. On reissue
of forfeited shares, the following amount will be transferred to the Capital
Reserve Account:
(a) Rs. 70,000 (b) Rs. 1,40,000
(c) Rs. 42,000 (d) Rs. 3,15,000
Q.47. Maple Tree Ltd. had forfeited 1,000 Equity Shares of Rs. 10 each for non-
payment of First and Final Call of Rs. 4 per share. It reissued 400 of these
shares and transferred Rs. 2,000 to Capital Reserve. Forfeited shares were
reissued for
(a) Rs. 800 (b) Rs. 3,200
(c) Rs. 3,600 (d) Rs. 2,400
Q.48. Sal Tree Ltd. had forfeited 5,000 Equity Shares of Rs. 10 each that were
issued at a premium of Rs. 5 per share for non-payment of First and Final Call
of Rs. 4 per share. the forfeited shares were reissued for Rs. 8 per share as
fully paid-up. the amount that will be transferred to Capital Reserve will be
(a) Rs. 10,000 (b) Rs. 20,000
(c) Rs. 30,000 (d) Nil
Q.49. Aspen Tree Ltd. had forfeited 3,000 Equity Shares of Rs. 10 each that were
issued at par for non-payment of Allotment Money of Rs. 3 per share and First
and Final Call of Rs. 3 per share. 1,500 Equity shares out of the forfeited
shares were reissued for Rs. 8 per share as Rs. 9 paid-up. The amount that
will be transferred to Capital Reserve and Securities Premium Reserve will be
(a) Rs. 5,500 and Nil (b) Rs. 4,500 and Nil
(c) Rs. 2,500 and Nil (d) Nil and Nil
Q.50. Jackfruit Tree Ltd. had forfeited 4,000 Equity Shares of Rs. 10 each that were
issued at par for non-payment of Allotment Money of Rs. 3 per share and First
and Final Call of Rs. 3 per share. 2,000 Equity shares out of the forfeited
shares were reissued for Rs. 8 per share as Rs. 7 paid-up. The amount that
will be transferred to Capital Reserve and Securities Premium Reserve will be
(a) Rs. 24,000 and Rs. 2,000
(b) Rs. 8,000 and Rs. 2,000
(c) Rs. 6,000 and Rs. 2,000
(d) Rs. Nil and Nil

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Q.51. Papaya Tree Ltd. had forfeited 3,000 Equity Shares of Rs. 10 each that were
issued at premium of Rs. 2 per share for non-payment of Allotment Money of
Rs. 5 (including premium) per share and First and Final Call of Rs. 3 per
share. 1,500 Equity share out of the forfeited shares were reissued for Rs. 8
per share as fully paid-up. The amount that will be transferred to Capital
Reserve and debited to Securities Premium Reserve will be
(a) Rs. 3,000 and Rs. 3,000
(b) Rs. 3,000 and Nil
(c) Rs. 3,000 and Rs. 6,000
(d) Nil and Nil
Q.52. If a shareholder does not pay the due amount on allotment and the company
does not transfer amount not received to Calls-in-Arrears Account, for the
amount due, there will be a
(a) Credit balance in Shares Allotment Account
(b) Debit balance in Shares Forfeiture Account
(c) Credit balance in Shares Forfeiture Account
(d) Debit balance in Shares Allotment Account
Q.53. If a shareholder does not pay the due amount on allotment and the company
transfers amount not received to Calls-in-Arrears Account, for the amount
due, there will be a
(a) Credit balance in Shares Allotment Account
(b) Debit balance in Calls-in-Arrears Account
(c) Credit balance in Calls-in-Arrears Account
(d) Debit balance in the Shares Allotment Account
Q.54. Sun and Moon Ltd. invited applications for 25,000 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 application money and full allotment to rest of the
applicants.
(ii) Not to allot any share to some applicants, full allotment to some of the
applicants and pro rata allotment to the rest of the applicants.
(iii) Not to allot any share to some applicants and make pro rata allotment
to other applicants.

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(iv) Make pro rata allotment to all the applicants and adjust the excess
money received towards call money.
(a) Only (i) (b) Both (i) and (iii)
(c) Only (ii) (d) All of these

ASSERTION – REASON BASED QUESTIONS:

Given below are two statements (in each question), one labelled as Assertion (A)
and other labelled as Reason (R) :
Q.1. Assertion (A) : A company is an artificial person, created under the
provisions of law and has separate legal entity with perpetual succession.
Reason (R) : A company is a legal entity set up by a group of individuals
(promoters) under the provisions of the Companies Act and it can own
properties in its name, can sue or be sued. Death, lunacy, bankruptcy of a
shareholder does not affect continuation thereof.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Only Assertion (A) is correct.
(d) Both Assertion (A) and Reason (R) are not correct.
Q.2. Assertion (A) : Unlike in the case of partnership, liability of the member
(shareholder) of a company with unlimited liability is limited to the amount of
shares owned by him.
Reason (R) : Liability of a member (shareholder) is limited to the shares
subscribed by him in the case of Companies with limited liability.
In the context of above two statement, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).

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(c) Both Assertion (A) and Reason (R) are not correct.
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.3. Assertion (A) : A feature of a company is that it has perpetual succession as
the death, lunacy or bankruptcy of a shareholder does not affect its existence,
i.e., it continues,
Reason (R) : Shares held in the company are transferable complying with the
provisions of law.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Only Assertion (A) is correct.
(d) Both Assertion (A) and Reason (R) are not correct.
Q.4. Assertion (A) : A company, whether public or private, can have any number
of shareholders.
Reason (R) : A public limited company can have any number of shareholders
but a private company can have maximum 100 shareholders excluding its
past and present employees.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Only Assertion (A) is correct.
(d) Both Assertion (A) and Reason (R) are not correct.
Q.5. Assertion (A) : A public company must have at least 7 members and any
number of shareholders.
Reason (R) : A private company must have at least 2 members and
maximum 200 shareholders excluding its past and present employees.
In the context of above two statements, which of the following is correct?

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(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not
the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Only Assertion (A) is correct.
(d) Both Assertion (A) and Reason (R) are not correct.
Q.6. Assertion (A) : Preference Shareholders have the right to receive dividend, if
it is paid to the Equity Shareholders and also in the event of company's
winding up, right to receive repayment of capital before it is repaid to Equity
Shareholders.
Reason (R) : The Companies Act, 2013 defines Preference Sheets to be the
shares which have the preferential right to receive dividend and also
repayment of capital, if the company is wound up.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A)
(c) Only Assertion (A) is correct.
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.7. Assertion (A) : Non-cumulative Preference Shares are the shares on which
dividend if not paid in one year, is not carried forward and paid in the
subsequent years.
Reason (R) : Non-convertible Preference Shares are the shares which are
not convertible into shares or new debentures.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not
the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Assertion (A) is correct but the Reason (R) is not correct.
(d) Both Assertion (A) and Reason (R) are not correct.

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Q.8. Assertion (A) : Equity shares are the shares that bear maximum risk and
also get the maximum reward.
Reason (R) : Dividend on Equity Shares may or may not be paid every year
and unlike dividend on preference shares it may be paid large amount as
dividend. Reserves may be capitalised by issuing bonus equity shares. Also
market value may be higher than the purchase price.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is nt the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Only Assertion (A) is correct.
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.9. Assertion (A) : Authorised Share Capital is the maximum share capital that a
company can issue.
Reason (R) : Authorised Share Capital is the capital is the maximum amount
of share capital authorised to be issued by the Memorandum of Association.
In the context of above two statements, which of the following is correct?
(a) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(b) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(c) Only Assertion (A) is correct.
(d) Both Assertion (A) and Reason (R) are not correct.
Q.10. Assertion (A) : Issued Share capital may be more than or equal to
Authorised Share capital.
Reason (R) : Issued Share Capital is a part of Authorised Share Capital.
Thus, it can be equal to or lower than the Authorised Share Capital.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).

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(c) Only Assertion (A) is correct.

(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.11. Assertion (A) : Issued Share Capital and Subscribed Share Capital are
always same.
Reason (R) : Subscribed Share Capital is a part of Issued Share Capital.
Thus, it is always equal to the Issued Share Capital.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both, Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A)..
(c) Only Assertion (A) is correct.
(d) Both Assertion (A) and Reason (R) are not correct.
Q.12. Assertion (A) : Following is the Note to Account on Share Capital for the year
ended 31st March, 2021:
Liabilities (Rs.)
Share Capital
Authorised Capital
10,00,000 Equity Shares of Rs. 5 each 50,00,000
Issued Capital
10,00,000 Equity Shares of Rs. 5 each 50,00,000
Subscribed Capital
Subscribed and Fully Paid-up
10,00,000 Equity Shares of Rs. 5 each
50,00,000

Reason (R) : It is correctly prepared because Authorised Share Capital is te

maximum amount of capital that can be issued and Subscribed Share Capital
can be equal to the Issued Share Capital.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).

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(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Only Assertion (A) is correct.
(d) Both Assertion (A) and Reason (R) are not correct.
Q.13. Assertion (A) : Following is the Note to Account on Share Capital for the year
ended 31st March, 2021:
Liabilities (Rs.)
Share Capital
Authorised Capital
10,00,000 Equity Shares of Rs. 5 each 50,00,000
Issued Capital
8,00,000 Equity Shares of Rs. 5 each 40,00,000
Subscribed Capital
Subscribed and Fully Paid-up
9,00,000 Equity Shares of Rs. 5 each
45,00,000

Reason (R) : The Note to Account on Share capital is not correct because
Subscribed Share Capital cannot be more than the Issued Capital. Share
Capital unless issued cannot be subscribed. Issued Share Capital can be
equal to or less than the Authorised Share Capital.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Both Assertion (A) and Reason (R) are not correct.
(d) Assertion (A) is not correct but the Reason (R) is correct.

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Q.14. Assertion (A) : Lotus Flowers Ltd. had issued 10,000, Equity Shares of Rs.
10 each. It received the nominal (face) value of the shares except First & Final
Call of Rs. 3 per share on 1,000 shares. These 1,000 Equity Shares will be
shown as 'Subscribed but not fully paid-up' under 'Subscribed Capital'.
Reason (R) : The company has not received Rs. 3 per share on 1,000 Equity
Shares. Hence, these shares are not fully paid-up. They will be shown as
'Subscribed but not fully paid-up' under 'Subscribed Capital'.
In the context of above two statements, which of the following is correct?
(a) Assertion (R) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Both Assertion (A) and Reason (R) are not correct.
(d) Assertion (A) is not correct but Reason (R) is correct.
Q.15. Assertion (A) : Marigold Ltd. had issued 20,000, Equity Shares of Rs. 10
each. It had called the total nominal (face) value of the shares. It received the
called-up amount except First and Final Call of Rs. 3 per share on 2,000
shares. Note to Account on Share Capital will be as follows:
Liabilities (Rs.)
Share Capital
Authorised Capital
...Equity Shares of Rs. 10 each ...
Issued Capital
20,000 Equity Shares of Rs.10 each 2,00,000
Subscribed Capital
Subscribed and Fully Paid-up
18,000 Equity Shares of Rs. 10 each 1,80,000
Subscribed but not Fully Paid-up
2,000 Equity Shares of Rs. 10 each 20,000
Less :Calls-in-Arrears (2,000 × Rs. 3) 6,000 14,000 1,94,000

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Reason (R) : The company has not received Rs. 3 per share on 2,000 Equity
Shares. Hence, Rs. 6,000 are Calls-in-Arrears and thus, 2,000 Equity shares
are not fully paid-up. They will be shown as 'Subscribed but not fully paid-up'
and 'Subscribed Capital'.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Assertion (A) is correct but the Reason (R) is not correct.
(d) Both Assertion (A) and Reason (R) are not correct.
Q.16. Assertion (A) : Called-up Capital means share capital called-up by the
company on the Subscribed Shares.
Reason (R) : When a company issues shares amount of which is receivable
in instalments, it calls upon the shareholders to pay the amount as called.
Thus, it is the Called-up Capital.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Only Assertion (A) is correct.
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.17. Assertion (A) : Paid-up Capital means the share capital called-up by the
company on the Subscribed Shares.
Reason (R) : When a company issues shares amount of which is receivable
in instalments, it calls upon the shareholders to pay the amount as called
against which the shareholders pay. Thus, it is the Paid-up Capital.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).

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(c) Only Assertion (A) is correct.

(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.18. Assertion (A) : Calls not yet made by shareholders but received in advance
is shown as Paid-up Capital.
Reason (R) : Companies, if authorised by its Articles of Association can
receive amount against the call or calls yet to be made. Since, it is not due,
the amount so received is shown as Other Current Liabilities under Current
liabilities.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Both Assertion (A) and Reason (R) are not correct.
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.19. Assertion (A) : Calls made but amount is not received from the shareholders
are Calls-in-Arrears and is always transferred to Calls-in-Arrears Account and
are shown under Shares Subscribed but not Fully Paid-up as deduction in the
Note to Accounts on Share Capital.
Reason (R) : Amount not received against Calls are Calls-in-Arrears but it is
not always transferred to Calls-in-Arrears Account. It can be kept in the
respective Call Accounts as receivable. However, the amount not received is
shown under Shares Subscribed but not Fully Paid-up as Deduction.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Both Assertion (A) and Reason (R) are not correct
(d) Assertion (A) is not correct but the Reason (R) is correct.

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Q.20. Assertion (A) : Reserve Capital is a part of Subscribed Capital which the
company decides to call at the time of winding up of the company.
Reason (R) : Share Capital, which the companies resolve to call up on its
winding up, is termed as Reserve Capital.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Assertion (A) is correct but the Reason (R) is not correct.
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.21. Assertion (A) : Reserve Capital and Capital Reserve are synonymous terms,
i.e., they mean the same.
Reason (R) : Reserve Capital is the capital which the company resolves to
call on its winding up. Capital Reserve is a reserve to which capital profits are
transferred.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Both Assertion (A) and Reason (R) are not correct
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.22. Assertion (A) : Shares cannot be allotted unless minimum subscription is
received.
Reason (R) : SEBI has prescribed that a company issuing shares to public
cannot allow shares unless it receives subscription of 90% of the shares
issued.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).

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(c) Only Assertion (A) is correct

(d) Both Assertion (A) and Reason (R) are not correct.
Q.23. Assertion (A) : Shares issued as fully paid-up for consideration other than
cash are shown as 'Subscribed and fully Paid-up' under 'Subscribed Capital'.
Reason (R) : Shares when issued for consideration other than cash are
disclosed in the Note to Account on Share Capital. In case of fully paid-up
shares they are shown as 'Subscribed and fully Paid-up' under 'Subscribed
Capital'.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.24. Assertion (A) : Shares cannot be issued at a discount to public. They can be
issued at par or at premium.
Reason (R) : Shares cannot be issued at a discount unless they are issued
as ESOPs (Section 54 of the Companies Act, 2013). They can be issued at
par or at premium.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not
the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Assertion (A) is correct but the Reason (R) is not correct.
(d) Both Assertion (A) and Reason (R) are not correct.
Q.25. Assertion (A) : Premium received on issue of shares is credited to Securities
Premium Reserve.
Reason (R) : Securities Premium Reserve Account is a reserve hence,
maybe credited to General Reserve.
In the context of above two statements, which of the following is correct?

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(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.26. Assertion (A) : Securities Premium Reserve can be used for issue of Partly
Paid Bonus Shares.
Reason (R) : The Companies Act, 2013 prescribes that Securities Premium
Reserve Account can be used for issue of Fully paid-up or partly paid-up
Bonus Shares.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Both Assertion (A) and Reason (R) are not correct.
Q.27. Assertion (A) : Preliminary Expenses and Provision for Premium on
Redemption of Preference Shares can be written off from Securities Premium
Reserve.
Reason (R) : As per the Companies Act, 2013 [Section 52(2)], Securities
Premium Reserve can be used for writing off Preliminary Expenses and
providing for Premium on Redemption of Debentures.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Assertion (A) is not correct but the Reason (R) is correct.

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Q.28. Assertion (A) : In the event of issue of shares being over-subscribed, shares
can be issued on pro rata basis to all the applicants.
Reason (R) : The number of shares allotted cannot be more than the number
of shares issued for subscription, allotment can not be made to all the
applicants. Hence, shares may be allotted on pro rata basis to all the
applicants.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Assertion (A) is correct but the Reason (R) is not correct.
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.29. Assertion (A) : The method of pro rata allotment is used when the issue is
over-subscribed.
Reason (R) : Under-subscription of shares means that the applications
received against issue of shares are less than the number of shares issued
for subscription.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not
the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Both Assertion (A) and Reason (R) are not correct.
Q.30. Assertion (A) : When the issue is under-subscribed and the amount is
receivable in instalments, Shares Allotment Money and Calls amount
receivable is determined on the basis of shares applied.
Reason (R) : Under-subscription of shares is a situation where the shares
issued are not fully subscribed. Hence, the amount receivable as allotment
money and calls money is determined on the basis of number of shares
applied.

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In the context of above two statements, which of the following is correct?

(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.31. Assertion (A) : If the issue of shares is oversubscribed, shares may be
allotted to the applicants in any of the following three methods:
(i) Allotment to some applicants and rejecting the remaining.
(ii) Allotment to some applications, rejection of some applications and pro
rata allotment to remaining applications or
(iii) Pro rata allotment to all the applications.
Reason (R) : Shares cannot be allotted more than the number of shares
issued for subscription. Thus, in the event of over-subscription, shares will be
allotted that are not more than the shares issued for subscription. Hence,
some of the applications have to be refused allotment. A company can refuse
allotment on excess applications by any of the three methods, i.e, (i) Allotment
to some applicants and rejecting the remaining, (ii) Allotment to some
applications, rejection of some applications and pro rata allotment to
remaining applications or (iii) pro rata allotment to all the applications.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Both Assertion (A) and Reason (R) are not correct.
Q.32. Assertion (A) : Shares may be forfeited, i.e., cancelled if the shareholder or
shareholders do not pay the allotment money and / or calls money by the due
date.
Reason (R) : By subscribing the shares, the applicant agrees to pay the
amount on the shares as per the terms of issue. If the amount is not paid, it is

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a breach of agreement and the company may forfeit the shares following the
process of law.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.33. Assertion (A) : Forfeited shares may be reissued by the company on the
terms that different from the issue of shares.
Reason (R) : Reissue of forfeited shares can be reissued at their nominal
(face) value or at premium.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.34. Assertion (A) : Forfeited shares may be reissued by the company at a
discount but the amount of discount cannot be more than the amount forfeited
on the reissued shares.
Reason (R) : It being sale of shares and not an issue of shares. thus, the
company can reissue them at any price.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Assertion (A) is correct but the Reason (R) is not correct.
(d) Both Assertion (A) and Reason (R) are not correct.

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Q.35. Assertion (A) : Forfeited shares when reissued at a discount, the discount
allowed is debited to Discount on Issue of Shares Account and is written off in
the year they are reissued.
Reason (R) : Discount allowed on reissue of forfeited shares is debited to
Forfeited Shares Account and not to Discount on Reissue of Forfeited Shares
Account.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Both Assertion (A) and Reason (R) are not correct.
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.36. Assertion (A) : Reissue of forfeited shares at a discount may leave a balance
in Forfeited Shares Account, the proportionate amount relating to reissued
shares from balance so left is transferred to Capital Reserve.
Reason (R) : If forfeited shares are reissued at a discount, the proportionate
amount of Forfeited Shares Account on reissued shares is transferred to
Statement of Profit and Loss.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.37. Assertion (A) : Ola ltd. had forfeited 1,000 shares of Rs. 10 each on which it
had not received First and Final Call of Rs. 3 per share. It reissued 500 of
these shares to Rajesh for Rs. 5 per share as fully paid-up. The amount that
will be transferred to Capital Reserve will be Rs. 1,000.
Reason (R) : Balance remaining in Forfeited Shares Account for the reissued
shares is a capital profit and is transferred to capital Reserve. Amount
forfeited on 500 shares is Rs. 3,500 (500 × Rs. 7) and discount allowed on

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500 shares is Rs. 2,500 (500 × Rs. 5). Hence, capital profit is Rs. 1,000 (Rs.
3,500 – Rs. 2,500)
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Assertion (A) is correct but the Reason (R) is not correct.
(d) Both Assertion (A) and Reason (R) are not correct.
Q.38. Assertion (A) : Uber Ltd. had forfeited 5,000 shares of Rs. 10 each on which
it had not received First and Final Call of Rs. 4 per share. It reissued 2,000 of
these shares to Ramesh for Rs. 5 per share as Rs. 8 paid-up. the amount that
will be transferred to Capital Reserve will be Rs. 12,000.
Reason (R) : Balance remaining in Forfeited Shares Account for the reissued
shares is a capital profit and is transferred to capital Reserve. Amount
forfeited on 2,000 shares is Rs. 12,000 (2,000 × Rs. 6) and discount allowed
on 2,000 shares is Rs. 6,000 (2,000 × Rs. 3). Hence, capital profit is Rs. 6,000
(Rs. 12,000 – Rs. 6,000).
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.39. Assertion (A) : Rent-a-Car Ltd. had forfeited 2,000 shares of Rs. 10 each on
which it had not received First and Final Call of Rs. 3 per share. It reissued
1,500 of these shares to Raman for Rs. 10 per share as Rs. 8 paid-up. The
amount that will be transferred to Capital Reserve will be Rs. 10,500 and
credit Securities Premium Reserve by Rs. 3,000.
Reason (R) : Balance remaining in Forfeited Shares Account for the reissued
shares is a capital profit and is transferred to Capital Reserve. Amount
forfeited on 1,500 shares is Rs. 10,500 (1,500 × Rs. 7). These shares have
been reissued at Rs. 10 as Rs. 8 paid-up. Thus, discount has not been

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allowed instead premium is received. Hence, amount forfeited on these

shares i.e. Rs. 10,500 is the capital profit and will be transferred to Capital
Reserve and Rs. 3,000 (1,500 × Rs. 2) will be credited to Securities Premium
Reserve Account.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.40. Assertion (A) : Rent-a-cab Ltd. had forfeited 3,000 shares of Rs. 10 each on
which it had not received First and Final Call of Rs. 2 per share. It reissued
2,000 of these shares to Pawan for Rs. 8 per share as fully paid-up. The
amount that will be transferred to Capital Reserve will be Rs. 12,000.
Reason (R) : Balance remaining in Forfeited Shares Account for the reissued
shares is a capital profit and is transferred to Capital Reserve. Amount
forfeited on 2,000 shares is Rs. 16,000 (2,000 × Rs. 8). Since, discount is not
allowed on 2,000 shares, amount forfeited on these shares, i.e., Rs. 16,000
(2,000 × Rs. 8) is capital profit and will be transferred to Capital Reserve.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Both Assertion (A) and Reason (R) are not correct.
Q.41. Assertion (A) : Frozen Foods Ltd. issued for subscription 1,00,000 Equity
Shares of Rs. 10 each at a premium of Rs. 2 per share payable along with
application. It received applications for 1,50,000 shares. It decided to issue
shares to applicants on pro rata basis. Amit who had applied for 600 shares
will get 200 shares.

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Reason (R) : Pro rata allotment will be made in the ratio of 2 : 3, i.e.,
applicants who applied for 2 shares will be allowed 3 shares. Since Amit had
applied for 400 shares he will be allotted 600 shares.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Both Assertion (A) and Reason (R) are not correct.
Q.42. Assertion (A) : ITC Foods Ltd. issued for subscription 1,00,000 Equity
Shares of Rs. 10 each at a premium of Rs. 2 per share payable along with
application. It received applications for 1,85,000 shares. The company
decided to issue shares to applicants as follows:
(i) Applications for 100 shares or less were refused allotment. Such
shares were 10,000
(ii) Applicants who applied for 5,000 shares were allotted full shares. Such
applicants were 5 in number; and
(iii) On pro rata basis to remaining applicants.
Reasons (R) : Pro rata allotment will be made in the ratio of 2 : 1, i.e.,
applications for 10,000 are rejected and full allotment is made on applications
of 25,000 shares. Balance applications for 1,50,000 shares, 75,000 shares
allotted. Hence, ratio will be 1:2.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Both Assertion (A) and Reason (R) are not correct.

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Q.43. Assertion (A) : Amul Foods Ltd. issued for subscription 1,00,000 Equity
Shares of Rs. 10 each payable along with application. It received applications
for 90,000 shares. Shares will be allotted in full to all the applicants.
Reason (R) : It is a case of undersubscription. Since minimum subscription
has been received, shares will be allotted to all the applicants for the shares
applied.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.44. Assertion (A) : Dairy Products Ltd. issued for subscription 1,00,000 Equity
Shares of Rs. 10 each payable Rs. 5 on application and balance on allotment.
It received applications for 85,000 shares. Shares will be allotted in full to all
the applicants.
Reason (R) : It is a case of undersubscription. Since minimum subscription
has not been received, shares will not be allotted to all the applicants for the
shares applied.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.45. Assertion (A) : Cadbury India Ltd. issued for subscription 5,00,000 Equity
Shares of Rs. 10 each payable Rs. 6 per share on application and balance on
allotment. It received Rs. 25,50,000 as application money. Shares will not be
allotted and application money will be refunded.
Reason (R) : It is a case of undersubscription. Thus, shares will be allotted to
all the applicants for the shares applied.

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In the context of above two statements, which of the following is correct?

(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Assertion (A) is correct but the Reason (R) is not correct.
(d) Both Assertion (A) and Reason (R) are not correct.
Q.46. Assertion (A) : Godrej Foods Ltd. issued for subscription 4,00,000 Equity
Shares of Rs. 10 each payable Rs. 4 on Application, Rs. 3 each on Allotment
and First and Final Call. Applications were received for 4,50,000 shares.
Shares were allotted to all the applicants on pro rata basis. Allotment Money
that should be received will be Rs. 10,00,000.
Reason (R) : Since pro rata allotment is made, excess application money will
be adjusted against Allotment Money. Excess Application money is Rs.
2,00,000 (50,000 × Rs 4), Balance Rs. 10,00,000 (i.e., Rs. 12,00,000 – Rs.
2,00,000) should be received.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is
the correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.47. Assertion (A) : Shakti Eatables Ltd. issued for subscription 2,00,000 Equity
Shares of Rs. 10 each payable Rs. 4 on Application, Rs. 3 each on Allotment
and First and Final Call. Applications were received for 4,00,000 shares.
Shares were allotted to all the applicants on pro rata allotment. Allotment
Money, after adjusting excess Application Money, that should be received will
be Rs. 1,00,000.
Reason (R) : Since pro rata allotment is made, excess application money will
be adjusted against Allotment Money to the extent of Rs. 6,00,000 (2,00,000 ×
Rs. 3) and balance Application money, i.e., Rs. 2,00,000 (50,000 × Rs. 4), will
be refunded.
In the context of above two statements, which of the following is correct?

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(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.48. Assertion (A) : Ready-to-Eat Ltd. issued for subscription 1,00,000 Equity
Shares of Rs. 10 each payable Rs. 4 on application, Rs. 3 each on allotment
and First and Final Call. Applications were received for 1,50,000 shares.
Shares were allotted to all the applicants on pro rata allotment. Allotment
Money on 10,000 shares Rs. 20,000 were not received and were transferred
to Calls-in-Arrears Account.
Reason (R) : Since pro rata allotment is made, excess application money will
be adjusted against allotment Money, i.e., Rs. 2,00,000. Balance amount, i.e.,
Rs. 1,00,000 is receivable. Shareholders holding 10,000 shares did not pay
the allotment money, i.e., Rs. 10,000 [(10,000 × Rs. 3 – (5,000 × Rs. 4))].
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.49. Assertion (A) : Lily Resorts Ltd. issued for subscription 2,00,000 Equity
Shares of Rs. 10 each at a premium of Rs. 4 payable Rs. 4 on application,
Rs. 7 on allotment and Rs. 3 on first and final call. Applications were received
for 5,00,000 shares. Share were allotted to all the applicants on pro rata
basis. Allotment Money on 10,000 shares was not received and these shares
forfeited. Amount transferred to Forfeited Shares Account is Rs. 80,000.
Reason (R) : Pro rata allotment in the ratio of 2 : 5 is made, excess
application money will be adjusted against Allotment Money and balance, if
any against Securities Premium. Application Money received on forfeited
shares (10,000 shares) Rs. 1,00,000 (25,000 × Rs. 4) will be adjusted towards
Share capital and Securities Premium as follows : Rs. 40,000 (10,000 × Rs. 4)
towards Application Money, Rs. 30,000 (10,000 × Rs. 3) towards Allotment

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Money and balance Rs. 30,000 towards Securities Premium. Securities

Premium Reserve received is not reversed on forfeiture. Rs. 70,000 (10,000 ×
Rs. 7) will be transferred to Forfeited Shares Account.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Both Assertion (A) and Reason (R) are not correct.
(d) Assertion (A) is not correct but the Reason (R) is correct.
Q.50. Assertion (A) : Mango Ltd. issued for subscription 2,00,000 Equity Shares of
Rs. 10 each payable Rs. 4 on application; Rs. 3 on allotment and balance on
first and final call. It received Rs. 16,00,000 as application money. Application
Money in excess of Allotment Money is to be adjusted against Call. All the
calls were made and duly received. Amount received on First and Final Call
was Rs. 4,00,000.
In the context of above two statements, which of the following is correct?
(a) Assertion (A) and Reason (R) are correct but the Reason (R) is not the
correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are correct and Reason (R) is the
correct explanation of Assertion (A).
(c) Only Assertion (A) is correct
(d) Both Assertion (A) and Reason (R) are not correct.

CASE STUDY BASED QUESTIONS:

1. Arun, Pritam and Poonam are friends, Arun is a Chartered Accountant while
Pritam and Poonam have degrees in Information Technology. All of them
have rich experience in their respective fields. The pandemic had changed the
way of life and also education, educational institutions were closed and their
opening was not in sight. They decided to set up a company for imparting
Online Education with a robust IT Platform which will meet the all-important
aspect of life, i.e., education. They set up a company with the name The
Online Education Ltd. with registered capital of Rs. 12,50,000 (12,500 Equity
Shares of Rs. 100 ach). Arun was responsible for incorporating the company.

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In the process of company incorporation, he spent Rs. 25,000 as Government

Fee besides putting in personal time.
In terms of the Memorandum of Association of the company, Arun, Pritam and
Poonam subscribed 500 Equity Shares each and paid the amount. Arun was
issued equity shares of Rs. 40,000 for amount spent by him and for his time to
incorporate the company.
The company issued 10,000 equity shares payable as Rs. 30 on application,
Rs. 30 on allotment, Rs. 20 on First call and balance on Final call. 9,000
shares were subscribed by the public. Allotment was made and calls made
were duly received except the Final call on 500 shares.
On the basis of above information, choose the correct option to the following
questions.

(i) The authorised Capital of the company is

(a) Rs. 11,50,000 (b) Rs. 11,50,000
(c) Rs. 12,50,000 (d) Rs. 11,00,000
(ii) The Issued Capital of the company is
(a) Rs. 12,50,000 (b) Rs. 10,90,000
(c) Rs. 10,50,000 (d) Rs. 11,90,000
(iii) The Subscribed Capital of the company is
(a) Rs. 12,50,000 (b) Rs. 10,90,000
(c) Rs. 10,50,000 (d) Rs. 10,10,000
(iv) The paid-up capital of the company is
(a) Rs. 10,80,000 (b) Rs. 10,40,000
(c) Rs. 10,50,000 (d) Rs. 8,90,000
(v) Shares issued to Arun will be shown in the Note to Account on Share Capital
as follows :
(a) Share issued will be shown under Authorised Capital, Issued Capital
and also Subscribed Capital.

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(b) Shares issued will be shown under Issued Capital and also Subscribed
Capital disclosing that 400 Equity Shares have been issued for
consideration other than cash under both Issued Capital and
Subscribed Capital.
(c) Shares issued will be shown under Issued Capital and also
Subscribed Capital disclosing that 400 Equity Shares have been
issued for consideration other than cash under Subscribed
Capital.
(d) Shares issued will be shown under issued Capital and also Subscribed
Capital.
2. Ramesh and Virat are qualified engineers. Due to ongoing covid pandemic,
jobs were difficult to find. Looking at the situation, they decided to take up a
health-related project and approached Sachin, a Chartered Accountant for
advice. After discussions, it was decided to set up Purified Water Plant,
product being packed in 200 ML, 500 ML and 1 Litre reusable plastic bottles.
Understanding their plans and business model, Sachin advised them to
incorporate a company, in which he will help. Sachin incorporated a company
for named Hello Purified Foods Ltd.
Registered capital of the company was kept at Rs. 25,00,000 (2,50,000 Equity
Shares of Rs. 10 each). The expense in incorporating the company was Rs.
65,000 as Government Fee and Sachin raised a bill of Rs. 25,000 for the
services rendered. They requested Sachin to take Equity Shares in the
company at par against his bill while they will pay Rs. 65,000 in a very short
time. Sachin agreed to the proposal.
In terms of the Memorandum of Association of the company, Ramesh and
Virat subscribed 1,000 Equity Shares each and paid the amount. A cheque of
Rs. 65,000 was issued to Sachin and also 2,500 Equity Shares were allotted
against his invoice.
Further funds were raised by issuing 1,00,000 equity shares for subscription
to relatives and friends payable as Rs. 3 on application, Rs. 3 on allotment,
Rs. 4 as first and final call. The shares were subscribed and amounts were

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duly received except the First and Final call on 1,000 Equity Shares held by
Pawan. The shares of Pawan were forfeited, in terms of the issue.
On the basis of above information, choose the correct option to the following
questions.
(i) At the time of forfeiture of Pawan's shares, Forfeited Shares Account
will be
(a) Debited with Rs. 6,000 (b) Credited with Rs. 6,000
(c) Debited with Rs. 7,000 (d) Credited with Rs. 7,000.
(ii) At the time of forfeiture of Pawan's shares, Share Capital Account will
be
(a) Debited with Rs 10,000 (b) Credited with Rs. 10,000
(c) Debited with Rs. 6,000 (d) Credited with Rs. 6,000
(iii) Shares issued for consideration other than cash are
(a) 4,500 Equity Shares of Rs. 10 each.
(b) 3,500 Equity Shares of Rs. 10 each.
(c) 2,500 Equity Shares of Rs. 10 each.
(d) 1,500 Equity Shares of Rs. 10 each.
(iv) The amount forfeited will be:
(a) Shown in Note to Account on Share Capital as addition to
Subscribed Capital.
(b) Shown in Note to Account on Share Capital as deduction to Subscribed
Capital.
(c) Shown as other Current Asset.
(d) Shown as other Current Liabilities.
3. Pawan, Rakesh and Anil are friends, Anil is an accountant while Pawan and
Rakesh are the first – time enterpreneurs. All of the got together to set up
accounting services company realising the need for good accountants. not
only within India but outside India as well. They decided to set up a company
named The Accounting Services Ltd. with a robust IT enabled accounting with
twin purposes, i.e., Skill Development and in the process availability of reliable
accounting staff.

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They set up a company with registered capital of Rs. 20,00,000 (2,00,000

Equity Shares of Rs. 10 each). The company was incorporated paying Rs.
40,000 as Government Fee and Rs.20,000 as fee to a Chartered Accountant
firm.
Pawan, Rakesh and Anil each subscribed 1,000 Equity Shares and paid the
amount.
The company issued 1,50,000 equity shares payable a Rs. 3 on application,
Rs. 4 on allotment, and balance Money was demanded and were duly
received except from a shareholder holding 1,000 shares who did not pay the
allotment money and call and from another shareholder holding 500 shares
who did not pay the call. These shares were forfeited.
On the basis of above information, choose the correct option to the following
question.
(i) Issue Share Capital of the company is
(a) Rs. 15,30,000 (b) Rs. 20,30,000
(c) Rs. 18,30,000 (d) Rs. 15,00,000
(ii) Subscribed Capital of the company is
(a) Rs. 15,30,000 (b) Rs. 15,15,000
(c) Rs. 15,00,000 (d) Rs. 15,10,000
(iii) The amount forfeited is
(a) Rs. 3,000 (b) Rs. 3,500
(c) Rs. 6,500 (d) Rs. 5,500
(iv) Shares Subscribed and Fully Paid-up of the company is
(a) Rs. 15,15,000 (b) Rs. 15,30,000
(c) Rs. 15,10,000 (d) Rs. 15,00,000
4. Ashish, Akash and Raman incorporated a company named The Grocers Ltd.
to sell grocery, vegetables and fruits online, Later other household items were
also to be added. A company with registered capital of Rs. 50,00,000
(1,00,000 Equity Shares of Rs. 50 each) was incorporated.
The company issued 60,000 equity shares at a premium of Rs. 5 per share
payable as Rs. 20 on application, Rs. 25 (including premium) on allotment,
and balance as First and Final Call. Subscription for shares was for 1,10,000
shares and allotment was made as follows:

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(a) Applications for 60,000 shares were allotted 30,000

(b) Applications for 40,000 shares were allotted 30,000
(c) Remaining Applications were refused allotment.
Underwriting Commission was payable @ 5% of Nominal (Face) Value of
Shares, by issue of Equity Shares at par.
Sohan who was in category (a) had applied for 1,000 shares paid the amount
due on call along with allotment money. Nikhil, who had applied for 1000
shares in category (a) and Vishwas who was allotted 600 Shares in Category
(b) did not pay the First and Final Call and their shares were forfeited.
On the basis of above information, choose the correct option to the following
question.
(i) Number of Shares allotted to Nikhil will be
(a) 750 (b) 600
(c) 800 (d) 500
(ii) Number of Shares applied by Vishwas :
(a) 600 (b) 700
(c) 800 (d) 900
(iii) Amount not received from Nikhil and Vishwas respectively is
(a) Rs. 5,000 and Rs. 6,000 (b) Rs. 7,500 and Rs. 17,000
(c) Rs. 2,500 and Rs. 12,000 (d) Rs. 6,200 and Rs. 9,000
(iv) Allotment money received on Allotment :
(a) Rs. 5,94,500 (b) Rs. 6,93,500
(c) Rs. 7,00,000 (d) R. 5,93,500
(v) Amount received as Calls in Advance from Sohan is
(a) Rs. 5,000 (b) Rs. 6,000
(c) Rs. 7,500 (d) Rs. 6,200
(vi) Amount transferred to Forfeited Shares Account on forfeiture is
(a) Rs. 41,500 (b) Rs. 40,500
(c) Rs. 46,000 (d) Rs. 44,000

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(vii) The amount of Underwriting Commission is

(a) Rs. 1,25,000 (b) Rs. 1,50,000
(c) Rs. 1,65,000 (d) Rs. 1,45,000
5. Kabir, Kishore and Kamath had incorporated a company in the name of
Hygiene India Ltd. to do the business of sanitising offices and homes with
registered capital of Rs. 5,00,000 (1,00,000 Equity Shares of Rs. 5 each).
The promoters of the company took 500 equity shares each in terms of the
Memorandum of Association. They purchased a running business of
Ashutosh & Co. for Rs. 4,00,000 paying by issue of shares at par so that they
do not loose time on setting up the necessary infrastructure. The assets and
Liabilities of Ashutosh & Co. were :
Plant and machinery Rs. 5,00,000; Vans Rs. 7,00,000; Sanitising Machines
Rs. 1,00,000 Stock of Chemicals Rs. 3,00,000 and Sundry Creditors Rs.
10,00,000
They had agreed to pay commission @ 5% of the net amount to Ajay, who
made the deal possible by issue of shares at par.
On the basis of above information, choose the correct option to the following
question.
(i) Amount that will be credited to Capital Reserve will be
(a) Rs. 2,00,000 (b) Rs. 1,50,000
(c) Rs. 6,00,000 (d) Rs. 4,00,000
(ii) Number of Shares issued will be
(a) 40,000 (b) 60,000
(c) 70,000 (d) 80,000
(iii) Commission payable to Ajay will be
(a) Rs. 30,000 (b) Rs. 40,000
(c) Rs. 50,000 (d) Rs. 60,000
(iv) Number of shares that will be shown as 'Shares issued for
Consideration other than Cash' under Issued Capital will be
(a) Rs. 6,000 (b) Rs. 3,000
(c) Rs. 2,000 (d) Nil

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6. Stock Market was rising ever since it reopened after lockdown. Charneshhad
considerable experience of trading in Stock Exchange. He discussed with
Harnesh and Bhupesh about starting the business of trading in listed
securities to which they agreed. They undertook to invest Rs. 5,00,000 each
and raise further capital by issuing shares for subscription. A NBFC in the
name of Moonlight Securities Ltd. with registered capital of Rs. 50,00,000
(5,00,000 shares of Rs. 10 each) was incorporated and after obtaining
necessary permissions from authorities started the business.
Soon they issued 3,00,000 shares to public for subscription at a premium of
Rs. 2 per share payable Rs. 3 on application, Rs. 5 on allotment, Rs. 2 as
First Call and balance as Final Call. Calls were made except the Final Call
and due amounts were duly received except the First Call on 1,000 shares.
These shares were forfeited. Subsequently, 400 of these shares were issued
for Rs. 6 per share as Rs. 7 paid-up and 600 re issued at Rs.8 per share fully
paid.
On the basis of above information, choose the correct option to the following
questions.
(i) Amount forfeited was
(a) Rs. 3,000 (b) Rs. 6,000
(c) Rs. 3,500 (d) Rs. 4,500
(ii) At the time of reissue of shares, Share Capital Account will be
(a) Debited with Rs. 8,800 (b) Credited with Rs. 8,800
(c) Credited with Rs. 6,800 (d) Debited with Rs. 6,800
(iii) Gain on reissue of shares is transferred to
(a) Profit and Loss Account (b) Reserve Capital
(c) Capital Redemption Reserve
(d) Capital Reserve
(iv) Gain on reissue of forfeited shares will be
(a) Rs. 2,400 (b) Rs. 5,000
(c) Rs. 3,000 (d) Rs. 4,400

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(v) Journal entry passed on forfeiture of shares will be :

(a) Share Capital A/c ...Dr. 8,000
To Forfeited Shares A/c 6,000
To Share First Call A/c 2,000
(1,000 shares forfeited for non-payment of first
call)
(b) Share Capital A/c ...Dr. 8,000
To Forfeited Shares A/c 8,000
(1,000 shares forfeited for non-payment of first call)
(c) Forfeited Shares A/c ...Dr. 6,000
First Call A/c ...Dr. 2,000
To Share Capital A/c 8,000
(1,000 shares forfeited for non-payment of first call)
(d) Forfeited Shares A/c ...Dr. 8,000
To Share Capital A/c 8,000
(1,000 shares forfeited for non-payment of first call)

(vi) Journal entry passed on reissue of forfeited shares will be:

(a) Bank A/c ...Dr. 7,200
Forfeited Shares A/c ...Dr. 6,000
To Share Capital A/c 8,800
To Capital Reserve A/c 4,400
(Forfeited shares reissued and gain on reissue
transferred to Capital Reserve)
(b) Bank A/c ...Dr. 7,200
Forfeited Shares A/c ...Dr. 6,000
To Share Capital A/c 10,000
To Capital Reserve A/c 3,200
(Forfeited shares reissued and gain on reissue
transferred to Capital Reserve)
(c) Bank A/c ...Dr. 7,200
Forfeited Shares A/c ...Dr. 6,000
To Share Capital A/c 9,800
To Capital Reserve A/c 3,400
(Forfeited shares reissued and gain on reissue
transferred to Capital Reserve)
(d) Bank A/c ...Dr. 7,200
To Share Capital A/c 7,200
(Forfeited Shares reissued)

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7. A group of seven friends did their MBA together. However, due to Covid
Pandemic, they were not able to find suitable jobs. They decided to start their
own business. they were unable to decide the business vehicle, i.e.,whether
to start their own business. They were unable to decide the business vehicle,
i.e., whether to start a partnership firm or a company. They wanted to be in a
business that will be profitable as well as beneficial for the society and carried
on for an unforeseen period.
Prashant and Anukool (two of the friends) gave the idea to start a business of
providing medical assistance within a few minutes of the request and save the
precious lives. They proposed to develop an App and Website for the purpose
to enable people to Log in and upload their requirements. All the other friends
agreed to the proposal. Duties and responsibilities were assigned to each of
them. They made every effort and set up the necessary infrastructure.
They estimated the funds' requirement of Rs. 30,00,000 for the purpose. At
that point of time, each of them had only Rs. 1,00,000. They tried for Bank
Loan but were refused loan since they did not have experience and also were
not able to give collateral security. A suggestion came to start a public
company and invite the general public to invest in their project. One of the
start-up Funds undertook to subscribe shares of at least Rs 10,00,000, which
was a big boost for them. Help was taken from a Chartered Accountant to
complete the legal formalities. A company named Medical-to-Home Ltd. was
incorporated with Authorised Capital of Rs. 25,00,000 (2,50,000 Equity
Shares of Rs. 10 each). All the seven promoters subscribed 10,000 shares
each as promoters.
They issued to public for subscription 2,00,000 shares of Rs. 10 each at a
premium of Rs. 2 for subscription, payable Rs. 3 on application, Rs. 6 on
allotment (including premium) and balance as First and Final Call. The shares
were over-subscribed and the company receive Rs. 9,60,000 as Application
Money. Pro rata allotment ws made to all the applicants in the ratio of 5 : 4.
Kumar holding 4,000 shares did not pay allotment money and his shares were
immediately forfeited. After the forfeiture, First and Final Call was made and
was duly received. 3,000 Equity Shares out of the forfeited 4,000 Equity
Shares were reissued for Rs. 8 per share as fully paid-up.

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Answer the following questions on the basis of above information.

(i) Total number of shares applied against Shares issued for subscription
are
(a) 3,60,000 shares. (b) 2,00,000 shares.
(c) 2,50,000 shares. (d) 10,00,000 shares.
(ii) Amount that will be refunded on allotment of shares will be
(a) Rs. 3,60,000 (b) Rs. 1,50,000
(c) Rs. 2,10,000 (d) Nil
(iii) Amount received as Allotment Money will be
(a) Rs. 10,50,000 (b) Rs. 12,00,000
(c) Rs. 10,29,000 (d) Rs. 10,26,000
(iv) Amount forfeited on forfeited of Kumar's Shares will be
(a) Rs. 12,000 (b) Rs. 15,000
(c) Rs. 20,000 (d) Rs. 21,000
(v) Amount received on First and Final Call will be
(a) Rs. 6,00,000 (b) Rs. 2,00,000
(c) Rs. 5,88,000 (d) Rs. 1,96,000
(vi) Amount transferred to Capital Reserve after reissue of forfeited shares
will be
(a) Rs. 9,000 (b) Rs. 5,250
(c) Rs. 3,000 (d) Rs. 15,000
(vii) Balance in Forfeited Shares Account after transfer to Capital Reserve
will be
(a) Rs. 15,000 (b) Rs. 3,750
(c) Rs. 6,000 (d) Nil

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