Chapter 6: Share Capital

Important Questions

1. Describe the salient features of a company?

2. What is the difference between private and public company?

3. Describe the following:-

1. Issued share capital
2. Paid up share capital
3. Reserve share capital

4. ABC Company Ltd was registered with a capital of 10,00,000 divided into equity shares of Rs. 100 each, issued 6000 shares to the public. The entire 6000 shares were subscribed for by the public and were duly allotted. The shareholders were called upon to pay Rs. 90 per share. The first call of Rs. 20 per share was not received on 100 shares. Show the presentation of various shares capital in the absence of the company.

5. Explain the difference types of shares?

Sample Questions

1. X Ltd was registered with a capital of 2300000 in shares of Rs. 10 each. It issued a prospectus inviting applications for 23000 shares at 40% premium payable at follows:-

On Application Rs. 5 (including Rs. 1 premium)

On Allotment Rs. 4 (including Rs. 1 premium)

On First call Rs. 3 (including Rs. 1 premium)

On Second call Rs. 2 (including Rs. 1 premium)

Applications were received for 23000 shares, All money was duly received. Pass the necessary journal entries.

2. The Adarsh Control Device ltd. Issued to the public for subscription of 1000 shares of Rs. 10 each at discount of 10% payable Rs. 4 on application, Rs. 3 on allotment and Rs. 2 on first and final call. The issues were fully subscribed and all the money was duly received.
Write the journal entries for the above in the books of accounts.

3. A Company issued to the public subscription 16, 8000 shares of Rs. 10 each at discount of 10% payable as Rs. 2 on Application, Allotment and first call and Rs.3 on the Final call. Applications were received for 2, 52000 shares and allotment was made prorate to 80% of applicants. R to whom 6720 shares were allotted to paid only the application money and S who had applied for 10080 shares paid the entire call money due along with the allotment. Pass the necessary journal entries to record the above transactions assuming that calls-in-arrears account is maintained.)

4. D Ltd. makes an issue of 10000 equity shares of Rs. 10 each payable as:-

1. On Application Rs. 3
2. On Allotment Rs. 3
3. On first and final call Rs. 4

All the shares were subscribed for. One shareholder who as allotted 500 shares however paid the entire amount due on his shares however paid the entire amount due on his shares along with his allotment money.

5. A company forfeited 800 equity shares of Rs.10 each issued at a discount of 10% for non-payment of first and final calls of Rs.2 each. Calculate the amount forfeited by the company and pass the journal entry for forefeiture of the shares.

MCQ

1. Given below are two statements, one labelled as Assertion (A) and the other as Reason (R).
Assertion(A) : In case the company fails to receive minimum subscription it cannot proceed for the allotment of shares
Reason (R) : When the company fails to receive minimum subscription it has to return the application money within 120 days from the date of issue of prospectus.
In the context ofthe apove two statements which of the following is correct:

(a) Both (A) and (R) are correct.
(b) (A) is correct but (R) is incorrect.
(c) Both (A) and (R) are incorrect.
(d) (A) is incorrect but (R) is correct.

2. X Ltd. invited applications for issuing 10,00,000 equity shares of ₹10 each at a premium of ₹9 per share. The amount was payable as follows:
On Application – ₹6 per share (including premium ₹3)
On Application – ₹6 per share (including premium ₹3)
On Allotment – ₹8 per share (including premium (₹4)
On first and final call – Balance
Applications for 15,00,000 shares were received. Shares were allotted on pro-rata basis to all applicants. Excess application money received with applications was adjusted towards sums due on allotment. Dharam to whom 600 shares were allotted failed to pay the allotment money. Allotment amount that was not paid by Dharam was:

(a) ₹4,800

(b) ₹600

(c) ₹3,000

(d) ₹2,400

3. PP Ltd. invited applications for issuing 10,000 equity shares of ₹10 each. Applications for 9,500 shares were received and allotment was made to all the applicants. Ravi a shareholder holding 200 shares failed to pay allotment money and his shares were forfeited. Mohan to whom 100 shares were allotted failed to pay the first call and his shares were forfeited immediately after the first call was made. Afterwards the second and final call was made. The second and final call will be due on how many shares?

(a) 9,500

(b) 9,300

(c) 9,200

(d) 10,000

4. Raman Ltd. was registered with an authorised capital of ₹5,00,00,000 divided into shares of ₹10 each. The company offered for subscription 4,00,000 shares. Applications were received for 4,50,000 shares. Applications for 50,000 shares were rejected. A shareholder holding 10,000 shares failed to pay the first and final call of ₹2 per share. The subscribed capital ofthe company is:

(a) ₹5,00,00,000

(b) ₹40,00,000

(c) ₹45,00,000

(d) ₹39,80,000

5. Nominal share capital is :

(a) that part of the authorised capital which is issued by the company.

(b) the amount of capital which is actually applied for by the prospective shareholders.

(c) the maximum amount of share capital which a company is authorised to issue.

(d) the amount actually paid by the shareholders.