CUET UG Accountancy Booster Test 2 Kinds of Companies -

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CUET UG Accountancy Booster Test 1 Kinds of Companies

⏱️ 30 Minutes

❓ 20 Questions

📌 Answers are locked once submitted — results and explanations appear at the end.

CUET UG Accountancy Booster Test 1 Kinds of Companies

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QUESTION 1 OF 20

📄 Passage

A private company is one which by its articles of association restricts the right to transfer its shares, limits the number of its members to 200, and must have at least 2 persons. Sec. 2(62) of the Companies Act, 2013 defines OPC as a company which has only one person as a member. Rule 3 provides that only a natural person being an Indian citizen and resident in India can form one-person company.

According to the passage, how does a private company formally restrict the right to transfer its shares?

Answer Review

📄 Passage

According to the passage, how does a private company formally restrict the right to transfer its shares?

A By government decree

B By SEBI guidelines

C By its articles of association

D By the Companies Act inherently

💡 Short Explanation

Private companies impose transfer restrictions. These restrictions are written internally. Articles of Association contain these rules.

✅ Correct Answer Explanation

The passage clearly states that a private company restricts the right to transfer its shares through its Articles of Association. Therefore, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → No government decree specifically imposes this restriction.
Option B → SEBI regulates securities markets, not internal transfer restrictions.
Option D → The Companies Act provides framework, but restriction is imposed through AOA.

🎯 Strategy

Used

Passage-Based Identification

Application:

The exact phrase from the passage directly gives the answer.

Final Logic:

AOA formally restricts share transfer.

🧠 Memory Trick

"Private Shares = AOA Restrictions"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Private Company Features – Page X

📄 Passage

Based on the passage and chapter context, the 200-member limit for a private company explicitly excludes which group?

A Its employees

B Its directors

C Its initial shareholders

D Its creditors

💡 Short Explanation

Employee-members are excluded. Limit applies to ordinary members. Maximum count remains 200.

✅ Correct Answer Explanation

Under the Companies Act, while calculating the 200-member limit of a private company, present and former employee-members are excluded. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Directors may still count as members if holding shares.
Option C → Initial shareholders are included.
Option D → Creditors are not members.

🎯 Strategy

Used

Legal Recall

Application:

The statutory exclusion rule was recalled directly.

Final Logic:

Employees are excluded from member count.

🧠 Memory Trick

"Employees Don't Count"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Member Limit – Page X

3 When calculating liability basis, if a member has paid Rs. 8 on a Rs. 10 share, what is their exact liability if the company is wound up?

A Rs. 10

B Rs. 8

C Rs. 0

D Rs. 2

💡 Short Explanation

Liability equals unpaid amount. Face value is Rs. 10. Paid amount is Rs. 8.

✅ Correct Answer Explanation

Liability of a shareholder in a company limited by shares is limited to the unpaid amount on shares. Calculation: 10 - 8 = 2 Therefore, the remaining liability is Rs. 2. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Ignores amount already paid.
Option B → Represents paid amount, not liability.
Option C → Liability exists because shares are not fully paid.

🎯 Strategy

Used

Substitution

Application:

Face value minus paid-up amount was calculated.

Final Logic:

Unpaid balance = Liability.

🧠 Memory Trick

"Liability = Unpaid Portion"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Limited Liability – Page X

4 Consider the following statements regarding membership basis:
1. A public company cannot be a subsidiary of a private company.
2. A private company needs at least 2 members.
Which is conceptually correct?

A Only 1 is correct

B Both 1 and 2 are correct

C Only 2 is correct

D Neither is correct

💡 Short Explanation

Private companies need minimum 2 members. Public companies cannot exist as subsidiaries of private companies. Both statements are conceptually valid.

✅ Correct Answer Explanation

Statement 1 is correct according to the conceptual classification rules discussed in the chapter. Statement 2 is also correct because a private company requires at least two members. Thus, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Statement 2 is also correct.
Option C → Statement 1 is also considered correct conceptually.
Option D → Both statements are valid.

🎯 Strategy

Used

Statement Verification

Application:

Each statement was independently checked.

Final Logic:

Both statements are correct.

🧠 Memory Trick

"Private Needs Two"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Membership Basis – Page X

5 Mr. A holds 500 fully paid shares of Rs. 100 each in a company limited by shares. The company goes bankrupt with Rs. 50 Lakhs in debt. What is Mr. A's liability?

A Rs. 50,000

B Proportionate share of the 50 Lakhs

C Nil, as shares are fully paid

D His private assets can be seized for settlement

💡 Short Explanation

Fully paid shares create no further liability. Liability is limited to unpaid amount. No unpaid balance remains.

✅ Correct Answer Explanation

In a company limited by shares, shareholder liability extends only to the unpaid amount on shares. Since Mr. A's shares are fully paid, no further liability exists. Thus, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Liability does not arise once shares are fully paid.
Option B → Shareholders are not liable for company debts beyond unpaid share amount.
Option D → Private assets cannot be seized in limited liability companies.

🎯 Strategy

Used

Conceptual Application

Application:

The principle of limited liability was applied.

Final Logic:

Fully paid shares mean zero liability.

🧠 Memory Trick

"Fully Paid = Fully Safe"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Company Limited by Shares – Page X

6 The uncalled liability of a shareholder in a company limited by shares is represented by the formula:

A Nominal Value - Paid up amount

B Issued Capital - Reserve Capital

C Paid up amount + Calls in Arrears

D Issued Capital - Subscribed Capital

💡 Short Explanation

Uncalled liability equals unpaid share value. Paid-up amount is deducted. Remaining amount may be called later.

✅ Correct Answer Explanation

The uncalled liability of shareholders equals the unpaid portion of the nominal value of shares. Formula: \text{Uncalled Liability} = \text{Nominal Value} - \text{Paid-up Amount} Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Unrelated capital categories.
Option C → Incorrect addition.
Option D → Does not represent shareholder liability.

🎯 Strategy

Used

Formula Identification

Application:

The unpaid liability formula was applied.

Final Logic:

Uncalled amount equals nominal minus paid-up.

🧠 Memory Trick

"Uncalled = Unpaid"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Uncalled Liability – Page X

7 A member guarantees to contribute Rs. 10,000 to a company limited by guarantee. During the normal active existence of the company, the creditors demand Rs. 5,000 directly from him. Is this legally valid?

A Yes, because he guaranteed up to Rs. 10,000

B No, the liability arises only in the event of winding up

C Yes, creditors can claim at any time

D No, liability is restricted strictly to share value

💡 Short Explanation

Guarantee liability is conditional. It activates during winding up. Creditors cannot claim during normal operations.

✅ Correct Answer Explanation

In companies limited by guarantee, member liability becomes enforceable only during winding up. Thus, creditors cannot directly demand the amount during active business operations. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Guarantee does not apply during ordinary operations.
Option C → Creditors cannot demand at any time.
Option D → Guarantee companies are not limited strictly to share value.

🎯 Strategy

Used

Conceptual Understanding

Application:

Timing of guarantee liability was examined.

Final Logic:

Guarantee activates only on winding up.

🧠 Memory Trick

"Guarantee = Winding Up Only"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Guarantee Companies – Page X

8 Arrange the chronological sequence of events triggering liability in a Guarantee Company:
1. Winding up process starts
2. Guarantee is undertaken at incorporation
3. Member contributes up to the guaranteed amount

A 1, 2, 3

B 3, 2, 1

C 2, 3, 1

D 2, 1, 3

💡 Short Explanation

Guarantee is promised at incorporation. Winding up triggers liability. Contribution occurs afterward.

✅ Correct Answer Explanation

Correct sequence: 1. Guarantee undertaken during incorporation 2. Winding up begins 3. Members contribute guaranteed amount Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Incorporation must occur first.
Option B → Contribution cannot precede winding up.
Option C → Contribution occurs after winding up starts.

🎯 Strategy

Used

Sequential Logic

Application:

Events were arranged chronologically.

Final Logic:

Guarantee → Winding Up → Contribution

🧠 Memory Trick

"Promise First, Pay Later"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Guarantee Liability – Page X

9 Assertion: Unlimited companies are permitted by the Companies Act but are generally not found in India.
Reason: There is no limit on the liability of its members, putting private property heavily at risk.

A Both Assertion and Reason are true, and Reason is the correct explanation.

B Both are true, but Reason is not the correct explanation.

C Assertion is true, Reason is false.

D Both are false.

💡 Short Explanation

Unlimited companies legally exist. Members face unlimited liability. Private assets remain exposed.

✅ Correct Answer Explanation

Unlimited companies are legally permitted under the Companies Act. However, they are rare because members have unlimited liability and personal assets may be used to settle company debts. Thus: Assertion is true. Reason is true. Reason correctly explains the Assertion. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Reason directly explains Assertion.
Option C → Reason is true.
Option D → Both statements are correct.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

Unlimited liability concept was linked to practical rarity.

Final Logic:

Unlimited risk discourages formation.

🧠 Memory Trick

"Unlimited Company = Unlimited Risk"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Unlimited Companies – Page X

10 Match the Following:

List 1	List 2
1. Unlimited Company	a. Private property can be used for debt
2. Guarantee Company	b. Liability only at winding up
3. Company Limited by Shares	c. Liability to the extent of unpaid share amount
4. Body Corporate	d. Formed according to the provisions of Law

A 1-b, 2-d, 3-a, 4-c

B 1-a, 2-c, 3-b, 4-d

C 1-c, 2-d, 3-b, 4-a

D 1-d, 2-a, 3-c, 4-b

💡 Short Explanation

Unlimited companies expose private assets. Guarantee liability arises at winding up. Share companies limit unpaid liability.

✅ Correct Answer Explanation

Correct matching: 1. Unlimited Company → c. Private property can be used for debt 2. Guarantee Company → d. Liability only at winding up 3. Company Limited by Shares → b. Liability limited to unpaid share amount 4. Body Corporate → a. Formed according to law Thus, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Incorrect matching for unlimited company.
Option B → Guarantee company incorrectly matched.
Option D → Multiple mismatches occur.

🎯 Strategy

Used

Option Grouping

Application:

Each company type was linked with its defining characteristic.

Final Logic:

Only Option C matches all correctly.

🧠 Memory Trick

"Unlimited-Private Risk, Guarantee-Winding Up"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Types of Companies – Page X

11 If a company wants to classify as a public company, it must ensure its articles do NOT contain which of the following restrictions?

A Right to issue a prospectus

B Right to freely transfer its shares

C Right to hold annual general meetings

D Right to appoint independent directors

💡 Short Explanation

Public company shares are freely transferable. Transfer restrictions belong to private companies. Public companies cannot restrict transfer rights.

✅ Correct Answer Explanation

A public company must not impose restrictions on free transferability of shares. Such restrictions are characteristics of private companies. Therefore, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Public companies may issue prospectus.
Option C → AGM provisions apply generally.
Option D → Independent directors are governance-related, not classification restrictions.

🎯 Strategy

Used

Conceptual Elimination

Application:

Private company restrictions were identified and excluded.

Final Logic:

Free transferability is essential for public companies.

🧠 Memory Trick

"Public Shares Move Freely"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Public Company Features – Page X

12 According to definition criteria, if a private company becomes a subsidiary of a public company, what is its status treated as?

A It remains a private company for all purposes

B It transforms into an unlimited company

C It automatically becomes an OPC

D It is considered a public company

💡 Short Explanation

Subsidiary relationship changes classification. Public company control affects status. It is treated as a public company.

✅ Correct Answer Explanation

Under company law provisions, a private company that becomes a subsidiary of a public company is treated as a public company. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → It loses pure private-company treatment.
Option B → No conversion into unlimited company occurs.
Option C → OPC rules are unrelated.

🎯 Strategy

Used

Legal Recall

Application:

Subsidiary classification rules were applied.

Final Logic:

Subsidiary of public company = Treated as public company.

🧠 Memory Trick

"Public Parent → Public Status"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Public vs Private Company – Page X

13 A firm has 1 single member and Rs. 60 Lakhs as paid-up share capital. Can it legally maintain OPC status?

A Yes, because it satisfies the 1 member rule

B No, its paid-up share capital exceeds Rs. 50 Lakhs

C Yes, if its turnover is below Rs. 2 Crores

D No, artificial persons cannot form an OPC

💡 Short Explanation

OPC has capital limit conditions. Paid-up capital exceeds permitted limit. OPC status cannot continue.

✅ Correct Answer Explanation

Though OPC requires only one member, it must also satisfy prescribed capital conditions. Since the paid-up share capital exceeds Rs. 50 Lakhs, OPC status cannot legally continue. Thus, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Member condition alone is insufficient.
Option C → Capital condition is already violated.
Option D → Natural persons can form OPCs.

🎯 Strategy

Used

Condition Verification

Application:

Both membership and capital conditions were checked.

Final Logic:

Capital limit violation disqualifies OPC status.

🧠 Memory Trick

"OPC Capital ≤ 50 Lakhs"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: OPC Conditions – Page X

14 For an OPC to retain its specific legal conditions, the average annual turnover of three years should strictly not exceed:

A Rs. 50 Lakhs

B Rs. 1 Crore

C Rs. 5 Crores

D Rs. 2 Crores

💡 Short Explanation

OPCs have turnover limits. Three-year average is considered. Maximum allowed is Rs. 2 Crores.

✅ Correct Answer Explanation

As per the relevant rules, an OPC should not exceed an average annual turnover of Rs. 2 Crores over three years to retain OPC status. Therefore, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Refers to lower capital threshold.
Option B → Incorrect turnover limit.
Option C → Exceeds prescribed limit.

🎯 Strategy

Used

Direct Recall

Application:

The statutory OPC turnover limit was recalled.

Final Logic:

Maximum permitted turnover = Rs. 2 Crores.

🧠 Memory Trick

"OPC Turnover = 2 Crores"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: OPC Turnover Limit – Page X

15 Three friends wish to start a private company together. Are they eligible based on the minimum member rule?

A Yes, because the minimum requirement is 2 members

B No, the minimum requirement is 7 members

C Yes, because the minimum requirement is 1 member

D No, the maximum requirement is 2 members

💡 Short Explanation

Private companies need minimum 2 members. Three friends satisfy requirement. Formation is legally valid.

✅ Correct Answer Explanation

A private company requires at least two members for incorporation. Since three friends are available, the requirement is fulfilled. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Seven members apply to public companies.
Option C → One member applies to OPC.
Option D → No such maximum of two exists.

🎯 Strategy

Used

Numerical Rule Application

Application:

Minimum member requirement was checked directly.

Final Logic:

3 ≥ 2, therefore eligible.

🧠 Memory Trick

"Private Needs Minimum Two"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Minimum Members – Page X

16 For calculating the 200 member limit conceptually in a private company, the correct mathematical condition is:

A Total Members + Employees = 200

B Total Members - Directors = 200

C Total Members (excluding employees) ≤ 200

D Total Members + Ex-employees ≤ 200

💡 Short Explanation

Employees are excluded from count. Maximum limit is 200. Condition applies after exclusion.

✅ Correct Answer Explanation

The statutory rule requires that a private company's members, excluding employee-members, should not exceed 200. Thus, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Employees are excluded, not added.
Option B → Directors are not automatically excluded.
Option D → Ex-employees may also be excluded under conditions.

🎯 Strategy

Used

Formula Interpretation

Application:

The membership condition was translated mathematically.

Final Logic:

Eligible members excluding employees must not exceed 200.

🧠 Memory Trick

"Exclude Employees, Then Count"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Member Limit Calculation – Page X

17 A company issues 10,000 shares of Rs. 10 each. What is the exact calculation of the minimum subscription amount required as per SEBI guidelines before allotment can proceed?

A Rs. 100,000

B Rs. 50,000

C Rs. 80,000

D Rs. 90,000

💡 Short Explanation

Minimum subscription = 90%. Total issue value = Rs. 1,00,000. 90% equals Rs. 90,000.

✅ Correct Answer Explanation

Total issue value: 10000 × 10 = 100000 Minimum subscription required: 90% × 100000 = 90000 Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Represents total issue value, not minimum subscription.
Option B → Too low.
Option C → Represents 80%, not 90%.

🎯 Strategy

Used

Substitution

Application:

SEBI's 90% rule was directly applied.

Final Logic:

Minimum subscription = Rs. 90,000.

🧠 Memory Trick

"SEBI Requires 90%"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Minimum Subscription – Page X

18 If the minimum subscription is not received, the application money must be completely returned within how many days of the date of issue of the prospectus?

A 120 days

B 130 days

C 8 days

D 15 days

💡 Short Explanation

Refund becomes compulsory. Time limit is legally fixed. Maximum period is 130 days.

✅ Correct Answer Explanation

If minimum subscription is not received, all application money must be refunded within 130 days from the issue of the prospectus. Thus, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Relates to subscription receipt period.
Option C → Too short and incorrect.
Option D → Not prescribed.

🎯 Strategy

Used

Factual Recall

Application:

The statutory refund deadline was recalled.

Final Logic:

Refund deadline = 130 days.

🧠 Memory Trick

"130-Day Refund Rule"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Refund of Application Money – Page X

19 Which of the following statements regarding comparative features is true?
1. Public companies have freely transferable shares.
2. Private companies have a hard limit of 200 members.

A Only 1

B Only 2

C Both 1 and 2

D Neither 1 nor 2

💡 Short Explanation

Public shares are freely transferable. Private companies have 200-member limit. Both statements are correct.

✅ Correct Answer Explanation

Statement 1 is correct because public company shares are freely transferable. Statement 2 is correct because private companies cannot exceed 200 members (excluding employees). Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Statement 2 is also true.
Option B → Statement 1 is also true.
Option D → Both statements are correct.

🎯 Strategy

Used

Statement Verification

Application:

Each comparative feature was independently checked.

Final Logic:

Both statements are valid.

🧠 Memory Trick

"Public = Free Transfer, Private = 200 Limit"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Public vs Private Companies – Page X

20 Arrange the following entities sequentially by their maximum allowed membership limits (Lowest to Highest):
1. OPC
2. Private Company
3. Public Company

A 1, 2, 3

B 3, 2, 1

C 2, 1, 3

D 1, 3, 2

💡 Short Explanation

OPC has one member. Private company limit is 200. Public company has no maximum limit.

✅ Correct Answer Explanation

Membership limits: OPC → Only 1 member Private Company → Maximum 200 members Public Company → No maximum limit Thus, arranged from lowest to highest: 1 → 2 → 3 Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Reverse order.
Option C → Private company cannot have fewer members than OPC.
Option D → Public company has highest limit.

🎯 Strategy

Used

Sequential Arrangement

Application:

Entities were arranged according to membership capacity.

Final Logic:

OPC < Private Company < Public Company

🧠 Memory Trick

"One → Two Hundred → Unlimited"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Membership Limits – Page X

CUET UG Accountancy Booster Test 1 Kinds of Companies

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