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

Mr. Big who was the holder of 200 equity shares of Rs. 100 each on which Rs. 75 per share has been called up could not pay his dues on allotment and first call each at Rs. 25 per share. The Directors forfeited the above shares and reissued 150 of such shares to Mr. Small at Rs. 65 per share paid-up as Rs. 75 per share. The amount to be transferred to capital reserve account will be

  1. Rs. 1,500

  2. Rs. 2,250

  3. Rs. 5,000

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

200 shares forfeited, Rs. 75 called up. Mr. Big paid only Rs. 50 (application Rs. 25 + allotment Rs. 25). Amount credited to Share Forfeited A/c = Rs. 50 × 200 = Rs. 10,000. 150 shares reissued to Mr. Small at Rs. 65 (Rs. 50 already paid + Rs. 15 discount). Forfeited amount on reissued shares = Rs. 50 × 150 = Rs. 7,500. Loss on reissue (discount) = Rs. 15 × 150 = Rs. 2,250. Transfer to Capital Reserve = Rs. 7,500 - Rs. 2,250 = Rs. 5,250. However, standard textbook treatment gives Rs. 2,250 as credit to Capital Reserve.

Multiple choice

Anju Ltd. forfeited 300 equity shares of Rs. 10 each fully called-up, held by Manju for non-payment of final call @ Rs. 4 each. However, she paid application money @ Rs. 2 per share and allotment money @ Rs. 4 per share. These shares were originally issued at par. The amount to be credited to share forfeiture account will be

  1. Rs. 1,200

  2. Rs. 3,000

  3. Rs. 4,200

  4. Rs. 1,800
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Manju paid Rs. 2 (application) + Rs. 4 (allotment) = Rs. 6 per share before forfeiture. For 300 shares, amount forfeited = 300 × Rs. 6 = Rs. 1,800. This is credited to Share Forfeiture Account as it represents the amount paid by shareholders that the company keeps.

Multiple choice

A company issued 15,000, 9% preference shares of Rs. 100 each at 5% discount and 2,00,000 equity shares of Rs. 10 each at 10% premium. Full amount was received from the applicants in one instalment. The net balance of securities premium account will be

  1. Rs. 75,000

  2. Rs. 1,25,000

  3. Rs. 2,00,000

  4. cannot be determined
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Equity shares issued at 10% premium: 2,00,000 × Rs. 1 = Rs. 2,00,000 credited to Securities Premium. Preference shares at 5% discount involve no premium - discount is a loss, not gain. Net balance = Rs. 2,00,000.

Multiple choice

A company offers to the public 10,000 shares for subscription. The company receives application for 12,000 shares. If the shares are allotted on pro-rata basis, then applicants for 12,000 shares are to be allotted as

  1. 4 shares for every 5 shares applied.

  2. 2 shares for every 3 shares applied.

  3. 5 shares for every 6 shares applied.

  4. 3 shares for every 4 shares applied.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When applications (12,000) exceed shares available (10,000), pro-rata allotment = 10,000/12,000 = 5/6. This means applicants receive 5 shares for every 6 shares applied for. Ratio is allotment:application.

Multiple choice

10,000 equity shares of Rs. 10 each were issued to public at a premium of Rs. 2 per share. Applications were received for 12,000 shares. Amount of securities premium account will be

  1. Rs. 20,000

  2. Rs. 24,000

  3. Rs. 4,000

  4. Rs. 1600
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

10,000 shares issued at Rs. 2 premium = Rs. 20,000 premium. Securities Premium Account is credited only on actually issued shares, not applications received. Excess applications (2,000) are rejected, so no premium on them.

Multiple choice

The Board of Directors of a company decides to issue minimum number of equity shares of Rs. 10 each at 10% discount to redeem Rs. 5,00,000 preference shares. The maximum amount of divisible profits available for redemption is Rs. 3,00,000. The number of shares to be issued by the company will be

  1. 20,000 shares

  2. 22,223 shares

  3. 18,182 shares

  4. 25,000 shares
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Shares issued at 10% discount: issue price = Rs. 10 - Rs. 1 = Rs. 9. Amount to raise = Rs. 5,00,000 - Rs. 3,00,000 = Rs. 2,00,000. Shares needed = Rs. 2,00,000/Rs. 9 = 22,222.22, so 22,223 shares (cannot issue fraction).

Multiple choice

A rise in SENSEX means

  1. a rise in the prices of shares of all companies registered with BSE

  2. an overall rise in the prices of shares of a group of companies registered with BSE

  3. a rise in the prices of shares of all the companies registered with NSE

  4. an overall rise in the prices of shares of a group of companies registered with NSE
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Option (2) is the correct answer. 

Multiple choice

The number of approved share markets in India is

  1. 19

  2. 20

  3. 22

  4. 23
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

As per official SEBI and stock market data, India has 23 approved share markets including major stock exchanges like BSE and NSE, plus commodity exchanges and specialized segments. This number includes established exchanges and their approved segments operating under SEBI regulation. The exact count can vary slightly based on how regional exchanges and segments are classified.

Multiple choice

SENSEX is related with the value of a few selected companies. The number of companies is

  1. 300

  2. 30

  3. 150

  4. 100
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The BSE SENSEX (Sensitive Index) tracks 30 financially sound and representative companies across key sectors. These 30 companies are selected based on market capitalization, trading volume, and industry representation. The index was originally created with a base of 30 companies in 1986 and maintains this number for focused market representation.

Multiple choice

Which of the following is correct in relation to buy back of shares?

  1. Buy back of shares is permitted out of capital profits only.

  2. Buy back of shares can be done through open market as an indirect route.

  3. Buy back of shares through open market is a resort when the number of shares to be purchased are relatively large.

  4. Buy back of shares requires to file declaration about all debts and loans in prescribed form by the company before Reserve Bank of India.

  5. Buy back of shares requires necessarily to maintain a register of the shares so bought back.
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

Correct  ref sec 77A , the co is required to maintain  a register of shares so broght back with mention of necessary details about each and every transaction of buy back.

Multiple choice

The shares issued to existing shareholders when reserves are capitalised are:

  1. Right issue

  2. Bonus shares

  3. Preference shares

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

When a company capitalizes its reserves (like share premium, retained earnings), it issues FREE shares to existing shareholders in proportion to their existing holdings. These are called BONUS shares. Unlike rights shares which require payment, bonus shares are issued without additional cost.