Commerce Accountancy · Economics

Equity Shares and Capital

505 Questions

Equity shares and capital topics deal with corporate share issuance, forfeiture rules, dividend distributions, and yield calculations. Questions require an understanding of financial instruments like preference shares and call options. These concepts are essential for accountancy and commerce examinations.

Share valuationDividend yieldPreference sharesShare forfeitureCapital structure

Equity Shares and Capital Questions

Multiple choice

ABC Co. issued 50,000 equity shares of Rs.10 at par & amount payable Rs. 5 on application, Rs. 3 on allotment & Rs. 2 on first call. All amount received on time except of 500 shares, on which first call amount is not received. Their shares forfeited and re-issued at Rs. 9 per share. What is the entry of forfeiture recored in the books?

  1. Dr. Share capital a/c 5,000 Cr. Share application a/c 2,500 Cr. Share allotment a/c 1,500 Cr. Share forfeiture a/c 1,000

  2. Dr. Share capital a/c 5,000 Cr. Share first call a/c 1,000 Cr. Share forfeiture a/c 4,000

  3. Dr. Share capital a/c 4,000 Cr. Share forfeiture a/c 4,000

  4. Dr. Share capital a/c 5,000 Cr. Share first call unpaid a/c 1,000 Cr. Share forfeiture a/c 4,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Amount paid on application & alottment transfered to share forfeiture, i.e. 4,000 [(500*5) + (500*3)].

Multiple choice

Which of the following is not a statutory provision regarding declaration and payment of dividend under Companies Act 1956?

  1. Dividend can be declared out of divisible profits only or out of money provided by the government.

  2. Dividend can be declared out of capital.

  3. Dividend can be calculated at the declared rate on paid up value of shares.

  4. Dividend can be declared on the nominal value or called up value of shares.

  5. All of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Dividend is never declared out of capital.

Multiple choice

Match the options given in the above lists ||| |---|---| |LIST 1:|LIST 2:| |A. Conservative dividend policy|1. Dividend is paid at usual rate regularly.| |B. Irregular dividend policy|2. Dividend is paid at very low rate or zero.| |C. Regular dividend policy|3. Dividend is paid according to the earnings of company.| |D. Constant payout ratio|4. Fixed dividend is paid, irrespective of income.| |E. Constant DPS|5. Fixed percentage of net earnings is paid as dividend.| |F. Strict dividend policy| |

  1. A - 1, B - 2, C - 3, D - 4, E - 5, F - 6

  2. A - 6, B - 3, C - 1, D - 5, E - 4, F - 2

  3. A - 6, B - 5, C - 4, D - 3, E - 2, F - 1

  4. A - 2, B - 6, C - 4, D - 1, E - 3, F - 2

  5. A - 5, B - 6, C - 4, D - 2, E - 3, F - 1
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Regular dividends at the usual rate are paid by the companies following regular dividend policy.

Multiple choice

Facility of buy-back of shares is allowed in which of the following cases?

  1. Buy-back of shares is through any subsidiary company including its own subsidiary company.

  2. Buy-back of shares is through any investment company or a group of investment companies.

  3. Buy-back is by purchasing the securities issued to employees of the company.

  4. The company has defaulted in repayment of preference shares.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

 The buy-back can be made by purchasing the securities issued to existing employees of the company. So the facility of buy-back of shares is allowed when the company intends to purchase its own shares from its employees.

Multiple choice

Share Warrant is a

  1. duplicate certificate

  2. share surrender certificate

  3. negotiable Instrument

  4. none of these

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

 Share Warrant is a negotiable instrument.  A share warrant shall entitle the bearer thereof to the shares therein specified and shares may be transferred by mere delivery of the warrant. 

Multiple choice

Which of the following amounts to buy-back of shares by a company?

  1. Redemption of preference shares

  2. Forfeiture of shares

  3. When company's own shares are purchased from the open market, by the company

  4. Acceptance of valid surrender of shares
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

 When own shares are purchased by the company from the open market at the prevailing market price as any other person would purchase them, it means that the company has purchased its own shares and it amounts to buy-back of shares.

Multiple choice

Lein on shares means

  1. a kind of security for a claim against a shareholder

  2. a kind of penal action against the shareholder

  3. a kind of legal obligation to be paid by the company

  4. a kind of negotiable instrument

Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

 Lein is a right of a person over the goods of another person in the form of a security for a claim upon that person. A company may have some claim upon a shareholder in relation to shares, therefore, it may mark its lien on the shares, so lien on shares is a kind of security for a claim against the shareholder.

Multiple choice

In which of the following cases, the membership of a shareholder is not terminated?

  1. When his shares are forfeited

  2. When he surrenders his shares

  3. When a shareholder's preference shares are redeemed

  4. When a share certificate is issued

Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

 The membership of a shareholder does not come to an end when a share certificate is issued. A share certificate is a certificate which certifies that he is the holder of a specified number of stated shares in the company.