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 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 accounts ratio analysis liquidity ratios accounting ratio's accounting ratios

Quick ratio is 1.8:1, current ratio is 2.7:1 and current liabilities are Rs. 60,000. Determine value of stock.

  1. Rs. 54,000

  2. Rs. 60,000

  3. Rs. 1,62,000

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
QA = Quick assets; CL = Current liabilities; CA = Current assets
QA = 1.8 x CL
QA = 1.8 x Rs. 60,000
QA = Rs. 1,08,000
CA = 2.7 x CA
CA = 2.7 x Rs. 60,000
CA = Rs. 1,62,000
Stock = CA - QA
Stock = Rs. 1,62,000 - Rs. 1,08,000
Stock = Rs. 54,000
Hence, the value of stock is Rs. 54,000.
Multiple choice elements of accounts ratio analysis liquidity ratios accounting ratio's accounting ratios

'X' Ltd. has a liquid ratio of 2:1. If its stock is Rs. 40,000 and its current liabilities are of Rs. 1 Lakh, What will be the current ratio________.

  1. 1.4 times

  2. 2.4times

  3. 1.2 times

  4. 3.4 times
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Liquid Ratio = [Current Assets minus Stock]/ Current Liabilities

             2      = [Current Assets - $40000$]/ $100000$
        $200000$ = Current Assets - $40000$
Therefore Current Assets = $Rs.240000$
Now,
Current Ratio = Current assets/Current liabilities
                        = $240000/100000$
                         = $2.4$ times

Multiple choice economics basic concepts of national income macroeconomic theories some basic concepts of macroeconomics introduction to macroeconomics

Change in stock is negative when:

  1. Closing stock $>$ Opening stock
  2. Closing stock $<$ Opening stock
  3. Closing stock $= 0$
  4. Opening stock $= 0$
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Change in stock is calculated as Closing Stock minus Opening Stock. If the Closing Stock is less than the Opening Stock, the result is negative.

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.

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

When business is sold to company, shares and debentures received are distributed in:

  1. The profit sharing ratio

  2. Equal ratio

  3. The ratio of their capitals standing before profit or loss on realization has been transferred

  4. The ratio of their capitals standing after profit or loss on realization has been transferred
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Whatever the company pays as consideration will be credited to the Realisation Account. If expenses are incurred by the firm, the amount will be debited to the Realisation Account. If the creditors are taken over by the company, no further treatment is necessary beyond transferring them to the credit of Realisation Account; but if creditors are to be paid by the firm, the actual amount paid to them will be debited to liability account concerned; the difference between the book figure and the amount actually paid will be transferred to Realisation Account. The profit or’ loss on realisation will be transferred to the capital accounts in the profit-sharing ratio.

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

Which of the following is the odd one?

  1. Net worth

  2. Owners equity

  3. Fixed interest liability

  4. Non-redeemable shares
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Net worth, owners' equity, and non-redeemable shares are all components of equity or capital. Fixed interest liability is a debt obligation, making it the odd one out.