Accounting MCQ on issue of Share Capital

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  1. Financial Accounting MCQ

MCQ on issue of Shares Capital

1. A company is a/an :

(a) Natural Person

(b) Artificial Person

(c) Both of the above

(d) None of the above

ANS.  (b) Artificial Person

2. A Shareholder gets:

(a) Dividend

(b) Salary

(c) Commission

(d) Interest

ANS.  (a) Dividend

3. The portion of the capital which can be called-up only on the winding up of the company is called:

(a) Authorised Capital

(b) Reserve Capital

(c) Uncalled Capital

(d)  Issued Capital

ANS. (b) Reserve Capital

4. Equity shareholders are:

(a) Creditors

(b) Directors

(c) Owners

(d) None of these

ANS.  (c) Owners

5. Securities Premium Reserve can be used for:

(a) Paying interest on debentures

(b) Meeting the cost of issue of shares

(c) Paying dividend on shares

(d) Paying tax liability

ANS. (b) Meeting the cost of issue of shares

6. The document required for issue of share capital by a company is:

(a) Prospectus

(b) Certificate of Incorporation

(c) Memorandum of Association

(d) Articles of Association

ANS. (a) Prospectus

7. Making an offer, inviting the public in general to subscribe for the shares is called:

(a) Initial Public Offer

 (c) Over Subscription

(b) Minimum Subscription

(d) Pro-rata Allotment

ANS.  (a) Initial Public Offer

8. If vendors are issued fully paid shares of  Rs. 5,00,000 in consideration of net assets of

Rs. 4,50,000, the balance of Rs.40,000 will be debited to:

(a) Goodwill A/c

(b) Profit and Loss A/c

(c) Revenue Reserve A/c

(d) Capital Reserve A/c

ANS. (a) Goodwill A/c

9. Premium received on issue of shares is shown at:

(a) Assets side

(b) Equity and Liabilities side

(c) Debit side of Statement of Profit and Loss

(d) Credit side of Statement of Profit and Loss

ANS. (b) Equity and Liabilities side

10. After reissue of forfeited shares, the balance of ‘Share Forfeited A/e’ is transferred to:

(a) Capital Redemption Reserve A/c

(b) Revenue Reserve A/c

(c) General Reserve A/c

(d) Capital Reserve A/c

ANS. (d) Capital Reserve A/c

11. The maximum amount upto which a company can issue capital is called:

(a) Authorised Capital

(b) Issued Capital

(c) Called-up Capital

(d) Subscribed Capital

ANS. (a) Authorised Capital

12. A public limited company can raise share capital by issue of:

(a) Memorandum of Association

(b) Prospectus

(c) Articles of Association

(d) Certificate of Incorporation

ANS. (b) Prospectus

13. The maximum number of shareholders in a private company can be:

(a) 10

(b) 200

(c) 100

(d) Unlimited

ANS. (b) 200

14. A company can issue:

(a) two types of shares

(c) four types of shares

(b) three types of shares

(d) five types of shares

ANS. (a) two types of shares

15. The minimum number of shareholders in public limited company must be:

 (a) 2

(b) 10

(c) 7

(d) 20

ANS. (c) 7

16. The maximum number of members in a public limited company is:

(a) Twenty

(b) Unlimited


(d) Two Hundred

ANS.  (b) Unlimited

17. Preference shareholders get priority over equity shareholders:

(a) In payment of dividend only

(b) In refund of capital only

(c) In both payment of dividend and refund of capital

(d) In payment of interest

ANS.  (c) In both payment of dividend and refund of capital

18. The amount received from shareholders towards share capital is:

(a) Authorised capital

(b) Called-up capital

(c) Paid-up capital

(d) Issued capital.

ANS. (c) Paid-up capital

19. The balance of Share Forfeited Account is transferred to:

(a) Profit and Loss Accountabl

(c) Revenue reserve

(b) Profit and Loss Adjustment Account

(d) Capital reserve

ANS. (d) Capital reserve

20. Calls-in-Arrear is:

(a) An expenditure

(b) An asset

(c) A liability

(d) An income

ANS. (b) An asset

21. Which of the following shares are convertible shares?

(a) Equity shares

 (b) Preference shares

(c) All of the above

(d) None of the above

ANS.  (d) None of the above

22. Which of the following is the main stage in the formation of a company?

(a) Promotion

(b) Incorporation

(c) Capital subscription

(d) All of the above

ANS.  (d) All of the above

23. Which of the following defines the limits and scope of a company?

(a) Memorandum of Association

(b) Certificate of Incorporation

(c) Share Certificate

(d) Articles of Association

ANS.  (a) Memorandum of Association

24. According to the Companies Act, which of the following is fixed as the rate of minimum subscription?

(a) 50% of the issue

(b) 90% of the issue

(c) 80% of the issue

(d) 60% of the issue

ANS. (b) 90% of the issue

25. When ‘Table F’ is applicable in case of a company, the company can charge interest call-in-arrears at the rate of not exceeding:

 (a) 9%

(b) 8%

(c) 3%


ANS. (d)10%

26. When ‘Table F’ is applicable in case of company, the company is required to pay interest on calls-in-advance at the rate of not exceeding:

(a) 12%

(c) 5%

(b) 8%

(d) 4%

ANS. (a) 12%

27. Share Application account is a :

(a) Personal Account

(b) Real  Account

(c) Nominal Account

(d) None of the Above

ANS. (a) Personal Account

28. Securities Premium Reserve is shown in the Balance Sheet under the sub-heading:

(a) Share Capital

(c) Current Liabilities

(b) Reserves and Surplus

(d) Non-current Liabilities

ANS. (b) Reserves and Surplus

 29. When shares are allotted, which of the following account is credited?

(a) Share Capital A/c

(b) Share Allotment A/c

(c) Shareholders’ A/c

(d) Share Application A/c

ANS. (a) Share Capital A/c

30. Right issue of shares is issued to:

(a) Employees

(b) Directors

(c) Existing shareholders

(d) Public

ANS. (c) Existing shareholders
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