Commerce Accountancy · Law Legal Studies

Business Organizations and Corporate Governance

1,402 Questions

Business organizations and corporate governance explore company structures, stakeholder responsibilities, and regulatory frameworks under the Companies Act. These commerce topics are essential for Chartered Accountancy, company secretary exams, and banking probationary officer assessments. Practice these questions to master corporate formation, director roles, and business ownership types.

Companies Act 2013 provisionsCorporate stakeholder rolesPrivate limited company rulesDebenture holder rightsCompany incorporation rulesState-owned enterprises

Business Organizations and Corporate Governance Questions

Multiple choice organisation of commerce and management sources of business finance - 2 equity shares share and stock equity and preference shares

A company funded through shares ___________.

  1. has unlimited liability

  2. exists only in contemplation of law

  3. has a perpetual succession

  4. comes to an end on the death of all the members
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A company funded through shares has a perpetual succession. Perpetual succession refers to the law of continuing the organization despite the death, insanity, exit of one member, etc.

Multiple choice organisation of commerce and management sources of business finance - 2 equity shares share and stock equity and preference shares

Public companies issued shares to public through document called ________________.

  1. Letter of offers & acceptance

  2. Offer for sale & acceptance

  3. Prospectus

  4. None of above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A Prospectus is a formal legal document that is required by and filed with the Securities and Exchange Commission (SEC) that provides details about an investment offering for sale to the public. 


The preliminary prospectus is the first offering document provided by a security issuer and includes most of the details of the business and transaction in question; the ,final prospectus containing finalized background information including such details as the exact number of shares/certificates issued and the precise ,offering price is printed after the deal has been made effective. In the case of mutual funds, a fund prospectus contains details on its objectives, investment strategies, risks, performance, distribution policy, fees and expenses, and fund management. 

A prospectus includes the name of the company issuing the stock or the mutual fund manager, the amount and type of securities being sold and, for stock offerings, the number of available shares. 

The prospectus also details whether an offering is public or private, how much the underwriters are earning per sale and names of the company’s principals. A brief summary of the company’s financial information, whether the SEC approved the prospectus and other pertinent information is included as well.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Which of the following capital is required for the registration of the company?

  1. Issued capital

  2. Subscribed capital

  3. Authorized capital

  4. Reserve capital
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Authorized capital (or nominal capital) is the maximum amount of share capital that a company is authorized to issue according to its constitutional documents.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

_______ is concerned about the rights of all stakeholders are protected.

  1. Owner

  2. Government

  3. Creditor

  4. Investor
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A person, group or organization that has interest or concern in an organization.
Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees, government (and its agencies), owners (shareholders), suppliers, unions, and the community from which the business draws its resources.
Not all stakeholders are equal. A company's customers are entitled to fair trading practices but they are not entitled to the same consideration as the company's employees.
Stakeholders have interest in business organisation and hence they have some rights against business, protection of which is look after by government.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

The stakeholders are ______ of financial statements.

  1. Valuers

  2. Users

  3. Both

  4. None of the Above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A stakeholder is either an individual, group or organization who is impacted by the outcome of a project. They have an interest in the success of the project, and can be within or outside the organization that is sponsoring the project. Stakeholders can have a positive or negative influence on the project.

 Financial statements are reports prepared by a company’s management to present the financial performance and position at a point in time. A general-purpose set of financial statements usually includes a balance sheet, income statements, statement of owner’s equity, and statement of cash flows. These statements are prepared to give users outside of the company, like investors and creditors, more information about the company’s financial positions.
These financial statements are used by stakeholders such as bankers, government, creditors, debtors etc.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

A _________ is a person associated with the business by monetary or non monetary terms.

  1. Stakeholder

  2. Shareholder

  3. Creditor

  4. Debtor
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A person, group or organization that has interest or concern in an organization are known as stakeholders. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees, government (and its agencies), owners (shareholders), suppliers, unions, and the community from which the business draws its resources.
Not all stakeholders are equal. A company's customers are entitled to fair trading practices but they are not entitled to the same consideration as the company's employees.

Stakeholder may be associated with the business by monetary and non monetary terms.
The owner and persons advancing loans are monetary stakeholders of business while, government , consumer or a researcher are the non monetary stakeholders of a business.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Objective of business is to communicate the meaningful information to various __________.

  1. Stakeholders

  2. Shareholders

  3. Creditors

  4. Banks
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Stakeholders are the persons who have monetary and non monetary interest in a business organisation. Stakeholders can affect or be affected by the organization's actions, objectives and policies. 

Some examples of key stakeholders are management, government, banks, creditors, debtors, employees and the communuity from which business draw its resources. Therfore, it is the objective of business to communicate the meaningful information to its various stakeholders.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

___________ are the stakeholders of an business organisation.

  1. Customer

  2. Government

  3. Creditor

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A stakeholder is either an individual, group or organisation who is impacted by the outcome of the project. They have an interest in the success of the project, and can be within or outside the organisation that is sponsoring the project. Bankers, customers, suppliers, government, management, shareholders etc. are all stakeholders of a business organisation. They are all have interest in a business organisation and gets affected by day to day affairs of business.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Which of the following are external stakeholders of a firm?

  1. Government.

  2. Bank.

  3. Investor.

  4. All of above.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A stakeholder is either an individual, group or organization who is impacted by the outcome of a project. They have an interest in the success of the project, and can be within or outside the organization that is sponsoring the project.

Stakeholder of a business may be internal stakeholders i.e., within the business organisation or external stakeholders i.e., outside the organization.
Examples of internal stakeholders are management, employees etc and examples of external stakeholders are bankers, government, investor, supplier etc.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Who appoints the auditors of a company?

  1. Shareholders

  2. Central Government

  3. Board of directors

  4. Registrar of companies
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

According to the Companies Act, the shareholders of a company have the authority to appoint auditors during the Annual General Meeting.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

A statutory auditor reports to____________.

  1. Debenture holders

  2. Central Government

  3. Board of directors

  4. Share holders
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Under section $143(3)$ of the Companies Act, $2013$, the duties of the auditor which relate to his report are that the auditor shall report to the shareholders on the accounts examined by him.

Multiple choice elements of accounts accounts from incomplete records stakeholders and their information requirements ascertainment of profit and loss calculation of profit or loss under single entry system of accounting and statement of affairs accounts from incomplete records - single entry system

Control of management of the company mainly vests in hands of __________ .

  1. Equity shareholders

  2. Preference shareholders

  3. Debenture-holders

  4. All of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A corporation generally has three parties sharing power and control: directors, officers, and shareholders. Directors are the managers of the corporation, and officers control the day-to-day decisions and work more closely with the employees.

Control of management of the company mainly vests in hands of equity shareholders.

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

Which Section of Companies Act 2013,describes the provisions regarding 'Additional Directors'?

  1. Section 160(1)

  2. Section 161(1)

  3. Section 262(3)

  4. Section 262(2)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

 Section 161(1) – Appointment of additional director

1.      The Board of directors may, if authorized by the articles, appoint additional directors. Such additional directors may hold office only up to the date of the annual general meeting.

2.       If the AGM of the company is not held or cannot  be held the person appointed as the additional director vacates his office on the last day on which AGM should have been held.

3.       It may be noted that a person who fails to get appointed as a additional director in a general meeting cannot be appointed as the additional director.

4.       If such a person, while he was the additional director of a company, had been appointed the Managing Director,  The latter appointment (i.e., the managing director) also ceases simultaneously with the termination of his directorship at the commencement of the annual general meeting.

Multiple choice accountancy provisions and reserves reserves provisions provision and reserves

The provisions relating to inter-corporate loans are inter-alia laid down in :

  1. Section 370 of the Companies Act 1956

  2. Section 372 of the Companies Act 1956

  3. Section 372A of the Companies Act 1956

  4. Section 371 of the Companies Act 1956
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

As per Section 370 of the companies Act 1956 had the provisions related to inter-corporate loans. According to this section No company (the lending company") shall make any loan to, or give any guarantee, or provide any security, in connection with a loan made by any other person to, or to any other person by, anybody corporate , unless the making of such loan, the giving of such guarantee or the provision of such security has been previously authorised by a special resolution of the lending company.


Further, Section 370 of companies Act 1956 has been repealed by Section 186 of New Companies Act 2013

Multiple choice elements of business sole trade meaning, features and merits of sole proprietorship sole proprietorship - meaning & features formation, characteristics, merits & demerits and objectives of sole proprietorship

____________ is the most flexible kind of business Organisation.

  1. Sole Proprietorship

  2. Partnership

  3. Co-Operatives and Trusts

  4. Limited Liability Partnership
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Sole proprietorship is the most flexible business form because the owner has total control and can change business operations, location, or scale without needing consensus or complex legal amendments.