NCERT Solutions for Class 12 Accountancy Part II Chapter 1 Accounting for Share Capital

Q. Equity Shareholders are:

  • (a) creditors
  • (b) owners
  • (c) customers of the company
  • (d) none of these
  • Ans. (b) owners
 Explanation :

Equity shareholders are the joint owners of the company. They have ownership rights in the company. They have the right to participate in the management of the company.

Q. 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.
  • Ans. (c) The maximum amount of share capital which a company is authorised to issue.
 Explanation :

The authorised capital of a company (sometimes referred to as the authorised share capital, registered capital or nominal capital) is the maximum amount of share capital that the company is authorised by constitutional documents to issue to the shareholders.

Q. Interest on calls in arrears is charged according to “Table F” at:

  • (a) 10%
  • (b) 6%
  • (c) 8%
  • (d) 11%
  • Ans. (a) 10%
 Explanation :

Interest on call arrears is the income of the company. Interest on call on arrears is a charge on the amount which defaulter shareholders have not paid on the amount called up by company.

Q. Shares can be forfeited:

A forfeited share is an equity share investment which is cancelled by the issuing company. A share is forfeited when the shareholder fails to pay the subscription money called upon by the issuing company.

  • (a) for non-payment of call money
  • (b) for failure to attend meetings
  • (c) for failure to repay the loan to the bank
  • (d) for which shares are pledged
  • Ans. (a) for non-payment of call money
 Explanation :

A forfeited share is an equity share investment which is cancelled by the issuing company. A share is forfeited when the shareholder fails to pay the subscription money called upon by the issuing company.

Q. The profit on re-issue of forfeited shares is transferred to:

  • (a) general reserve
  • (b) capital redemption reserve
  • (c) capital reserve
  • (d) revenue reserve
  • Ans. (c) capital reserve
 Explanation :

A capital reserve is defined as the reserve that is created from the capital profits of the company.

Q. Balance of share forfeiture account is shown in the Balance Sheet under the item:

  • (a) Current Liabilities and Provisions
  • (b) Reserves and Surplus
  • (c) Share Capital
  • (d) Unsecured Loans
 Explanation :

If the shareholder fails to pay any of the calls (one or more) then, on the authorisation of the board of directors, the said shares can be forfeited. The balance in the Share Forfeiture A/c is shown under the Share Capital on the liabilities side of the balance sheet. This account will remain till the said shares are reissued by the company.

Q. A company is an artificial person.

Ans. True

Q. Every member of a company is entitled to take part in its management.

Ans. False

Q. Company's shares are generally transferable.

Ans. True

Q. The director of a company must be a shareholder.

Ans. True

Q. Shareholders of a company are liable for the acts of the company.

Ans. False

Q. Share application account is a personal account.

Ans. True

Q. Paid-up capital can exceed called up capital.

Ans. False

Q. Capital reserves are created from capital profits.

Ans. True

Q. At the time of issue of shares, the maximum rate of securities premium is 10%.

Ans. False

Q. The shares originally issued at discount may be re-issued at a premium.

Ans. True