Commerce Accountancy · Economics

Equity Shares and Capital

424 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 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 company pays dividend out of _____________________.

  1. Profits of the company for year for which dividends are to be paid.

  2. Undistributed profit of the previous financial years.

  3. Money provided by the central and state governments for the payment of dividends in pursuance of their guarantors.

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

Dividends - Dividends are the sum of money to be paid to the members of the company out of the profits made by the company.

Sources od dividend :-
1. Profits of  the compnany for the year for which dividends are to be paid.
2. Undistributed profit of the previous financial years.
3. Money provided by the central and state governments for the payment of dividends in pursuance of their guarantors.

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 dividend per share in a company is Rs. 2, earning per share is Rs. 5, and the market value is Rs. 25. What will be its yield?

  1. 20 per cent

  2. 12.5 per cent

  3. 8 per cent

  4. 25 per cent
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Yield ratio = A financial ratio that indicates how much a company earns after   pays out in dividends each year relative to its share price.  yield ratio  is   represented as a percentage.

  yield ratio = ( Earning per share / Share price)* 100
  yield ratio = ( Rs.5 / Rs. 25) * 100
  yield ratio =  20 percent.                                   

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 authorised capital of M Ltd. consists of both cumulative preference shares and equity shares. Each $5$% cumulative preference share has a par value $Rs. 100$. Each equity share has a par value $Rs. 10$. During the year $2005-06$, the cumulative preference share capital was $Rs. 2,00,000$
If dividend declarations totalled $Rs. 25,000$ in the year $2005-06$, the dividends allocated to the equity shareholders in  the year $2005-06$ will be ___________.

  1. $Rs. 21,000$
  2. $Rs. 15,000$
  3. $Rs. 10,000$
  4. $Rs. 16,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
Dividend is a sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves).
 As the name syas, preference shareholders have prefernce over equity shareholders in payment of dividend.
Calaculation of dividend payablr on 5% cumulative prefence share capital is
Annual dividend =  Par value of share * Rate of dividend
Annual dividend = Rs. 200000 * 5%
Annual dividend = Rs. 10000
Dividend for equity shareholder = total dividend - preference dividend
Dividend for equity shareholder = Rs.25000 - Rs. 10000
Dividend for equity shareholder = Rs. 15000
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

Use the following information for questions given ahead:
B Ltd. was registered with a share capital of $Rs. 2,00,00,000$ divided into equity shares of $Rs. 10$ each. It issued $Rs. 1,80,00,000$ equity shares to the general public at par payable as to $Rs. 3$ on application, $Rs. 3$ on allotment and balance in $2$ equal calls. The public had subscribed for $17,00,000$ shares. Till $31st$ March, $2006$, only first call had been made. All the shareholders had paid up except Mr. C, a holder of $50,000$ shares, who did not pay the call money.
B Ltd.'s Issued Capital will be ____________.

  1. $Rs. 2,00,00,000$
  2. $Rs. 1,80,00,000$
  3. $Rs. 1,70,00,000$
  4. $Rs. 1,36,00,000$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Issued capital can be taken as the part of the authorized capital, which is actually offered to the public for subscription. The number of issued stock is a sub-group of the total authorized or registered shares. Issued capital is the quantity of stock which the BOD (Board of Directors) or stockholders have decided to assign. Generally, a company does not issue the entire authorized shares at a time so that the issued capital is always less than the authorized capital. 

Issued capital does not get affect by subscribed or paid up capital and hence, in the given question B Ltd.'s Issued capital is Rs. 1,80,00,000.

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

Use the following information for questions given ahead:
D Ltd. issued $2,00,000$ shares of $Rs. 100$ each at a premium of $Rs. 20$ per share payable as follows:
On application $Rs. 20$; On allotment $Rs. 50$ (including premium); On first call $Rs. 30$; On second and final call $Rs. 20$.
Applications were received for $3,00,000$ shares and pro-rata allotment was made to applications of $2,40,000$ shares. Money excess received on application was employed on account of sum due on allotment as part of share capital. A, to whom $4,000$ shares were allotted, failed to pay the allotment money and on his subsequent failure to pay the first call, his shares were forfeited and B, the holder of $6,000$ shares, failed to pay the two calls and his shares were forfeited after the second call. Of the forfeited shares, $8,000$ shares were reissued to C at a discount of $10$%, the whole of A's forfeited shares being reissued.
Amount refunded to shareholders will be ______________

  1. $Rs. 20,00,000$
  2. $Rs. 16,00,000$
  3. $Rs. 12,00,000$
  4. $Rs. 8,00,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
An oversubscribed security offering often occurs when the interest for an initial public offering (IPO) of securities exceeds the total number of shares issued by the underlying company. 
Pro rata is the term used to describe a proportionate allocation. It is a method of assigning an amount to a fraction according to its share of the whole. While a pro rata calculation can be used to determine the appropriate portions of any given whole, it is most commonly used in business finance.
Therefore, in the given case:
| No. of share applied for                 (1) | No. of share Allotted          (2) | Amount received on application        (3) | Amount required on allotment         (4) | Amount adjusted on allotment         (5) | Refund     (3) – (4) | | --- | --- | --- | --- | --- | --- | |        300000 |           240000 |       6000000 |       4800000 |           Nil |      1200000 |

 

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 one of the following securities cannot be issued by a public limited company in India?

  1. Participating preference shares.

  2. Redeemable preference shares.

  3. Deferred shares.

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

A deferred share is a share that does not have any rights to the assets of a company undergoing bankruptcy until all common and preferred shareholders are paid. It may also be a share that is issued to company founders that restricts their receipt of dividends until dividends have been distributed to all other classes of shareholder.
In India deferred shares were issued prior to 1956.The Companies Act, 1956 prohibited public limited companies to have these shares and hence these securities cannot be issued by a public limited company in India.

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 limited company has to redeem redeemable preference shares of the value of Rs. $1,00,000$ for which the company has issues $3000$ equity shares of Rs. $10$ each at a premium of $10\%$. The amount to be transferred to capital redemption reserve account will be.

  1. Rs. $1,00,000$
  2. Rs. $97,000$
  3. Rs. $70,000$
  4. Rs. $67,000$
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

If the preference shares are redeemed out of accumulated profit, it will be necessary to transfer an amount equal to the amount repaid on the redemption to Capital Redemption Reserve Account. If the company issues any fresh shares for redemption purpose, the transferred amount will be the difference between nominal value of shares redeemed and the nominal value of shares issued (i.e. amount transferred to CRR = Nominal value of shares redeemed – Nominal value of shares issued). The capital redemption reserve account can be used for issuing fully paid bonus shares.

Therfore, amount to be transferred to capital redemption reserve account will be Rs. 70000.

Multiple choice elements of business ownership structures - joint stock company meaning and objectives of public sector enterprises introduction to public sector organisations types of companies - private & public

Private company can allot shares without receiving minimum subscription

  1. Yes

  2. No

  3. Unknown

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

A privately held company, private company, or close corporation is a business company owned either by non-governmental organizations or by a relatively small number of shareholders or company members.

Multiple choice elements of business ownership structures - joint stock company meaning and objectives of public sector enterprises introduction to public sector organisations types of companies - private & public

S Ltd. had 9,000 8% preference tires of Rs 100 each, fully paid up. The company decided to redeem these preference shares at par by the issue of sufficient number of equity shares. How much equity shares are required to be issued if new equity shares are to be issued at Rs 12 for a premium including Rs 2 ______________.

  1. 90,000

  2. 1,00,000

  3. 5,000

  4. 93,333
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Redemption amount = 9,000 shares × Rs 100 = Rs 900,000. When equity shares are issued at Rs 12 each (Rs 10 face value + Rs 2 premium), the number of shares needed is 900,000 ÷ 12 = 75,000 shares. However, if the shares are issued at Rs 10 face value without premium adjustment, it would require 90,000 shares.

Multiple choice commercial applications public sector enterprises meaning and objectives of public sector enterprises introduction to public sector organisations types of companies - private & public forms of business organisation - 2
The public company has to take approval of SEBI, if public offer for shares exceeds __________ crores.

  1. two

  2. three

  3. five

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

The public company has to take approval of SEBI, if public offers for shares exceeds 3 crores according to the companies act. 

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

The premium on issue of shares (whether received in cash or in kind) is a:

  1. Revenue receipt

  2. Capital receipt

  3. Neither revenue nor capital receipt

  4. Both revenue and capital receipts
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Premium on the issue of shares is a capital receipt because it is a gain of a capital nature, not arising from the normal course of business operations.

Multiple choice book keeping and accountancy company accounts part - 2 (accounting for debentures) introduction to debentures meaning and features of debentures meaning of debentures

The formula of earning per share is ___________.

  1. $\dfrac {\text {Market price per equity share}}{\text {Number of shares}}$
  2. $\dfrac {\text {Gross profit}}{\text {Net sales}}\times 100$
  3. $\dfrac {\text {Operating costs}}{\text {Net sales}}\times 100$
  4. $\dfrac {\text {Net profit after tax and preference dividend}}{\text {Number of Equity shares}}$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Earning per share is the portion of a company's profit allocated to each outstanding share of the common stock. It serves as an indicator of the company's profitability. It is calculated by dividing the market price per equity share by no. of shares.