CUET UG Accountancy Booster Test 2 Share Capital -

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CUET UG Accountancy Booster Test 1 Share Capital

⏱️ 30 Minutes

❓ 20 Questions

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

CUET UG Accountancy Booster Test 1 Share Capital

1 / 20

QUESTION 1 OF 20

Consider the following statements regarding the meaning of shares:
(I) A share refers to the units into which the total share capital of a company is divided.
(II) A company can issue only equity shares under the Companies Act.

Answer Review

1 Consider the following statements regarding the meaning of shares:
(I) A share refers to the units into which the total share capital of a company is divided.
(II) A company can issue only equity shares under the Companies Act.

A Only I is correct.

B Only II is correct.

C Statement I is true, Statement II is false.

D Statement I is false, Statement II is true.

💡 Short Explanation

Shares are units of share capital. Companies can issue both equity and preference shares. Statement II is incorrect.

✅ Correct Answer Explanation

Statement I is correct because shares are the units into which share capital is divided. Statement II is false because under the Companies Act, companies can issue: Equity Shares Preference Shares Therefore, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Statement II is false, so this is incomplete.
Option B → Statement I is actually correct.
Option D → Statement I is not false.

🎯 Strategy

Used

Statement Verification

Application:

Each statement was checked independently against company law provisions.

Final Logic:

Only Statement I is true.

🧠 Memory Trick

"Shares Divide Capital"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Meaning of Shares – Page X

2 Since it is not possible or desirable for all shareholders to participate directly in the management of the company, how do they exercise their ownership interest?

A By surrendering their voting rights to the government.

B By electing a Board of Directors as their representative to manage the company.

C By appointing debenture holders to oversee operations.

D By managing operations through the company creditors.

💡 Short Explanation

Shareholders are owners. Directors manage on their behalf. Voting rights are exercised through elections.

✅ Correct Answer Explanation

Shareholders exercise their ownership rights by electing a Board of Directors who manage the affairs of the company on their behalf. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Shareholders do not surrender ownership rights.
Option C → Debenture holders are creditors, not managers.
Option D → Creditors do not manage company operations.

🎯 Strategy

Used

Conceptual Understanding

Application:

Ownership and management roles were distinguished clearly.

Final Logic:

Shareholders elect directors to manage the company.

🧠 Memory Trick

"Owners Elect Managers"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Ownership Interest – Page X

3 Assertion (A): A company can issue share capital exactly equal to or less than the Authorised Capital.
Reason (R): Authorised Capital is the maximum amount specified in the Memorandum of Association, and the company cannot raise more than this specified amount.

A Both A and R are false.

B A is true, R is false.

C A is false, R is true.

D Both A and R are true and R explains A.

💡 Short Explanation

Authorised capital is the upper limit. Companies cannot exceed it. Reason correctly explains assertion.

✅ Correct Answer Explanation

Authorised Capital represents the maximum capital a company may issue according to its Memorandum of Association. Therefore: A company may issue capital equal to or less than authorised capital. It cannot exceed that limit. Thus: Assertion is true. Reason is true. Reason correctly explains Assertion. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Both statements are legally correct.
Option B → Reason is also true.
Option C → Assertion is true.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

The relationship between issued and authorised capital was examined logically.

Final Logic:

Authorised capital limits share issue.

🧠 Memory Trick

"Authorised = Maximum Allowed"

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

4 What is the alternative term used for 'Authorised Capital' that represents the limit specified in the Memorandum of Association?

A Nominal or Registered capital

B Issued capital

C Uncalled capital

D Reserve capital

💡 Short Explanation

Authorised capital has alternative names. It is also called nominal capital. Registered capital is another synonym.

✅ Correct Answer Explanation

Authorised Capital is also known as: Nominal Capital Registered Capital Therefore, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Issued capital is part of authorised capital.
Option C → Uncalled capital refers to unpaid demand.
Option D → Reserve capital is reserved for winding up.

🎯 Strategy

Used

Definition Matching

Application:

Alternative accounting terminology was identified.

Final Logic:

Nominal/Registered Capital = Authorised Capital.

🧠 Memory Trick

"Authorised = Registered Limit"

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

5 A company registers its capital as Rs. 40,00,000 divided into 4,00,000 shares of Rs. 10 each. It offers 2,00,000 shares to the public for subscription. Calculate the amount of Issued Capital.

A Rs. 40,00,000

B Rs. 10,00,000

C Rs. 30,00,000

D Rs. 20,00,000

💡 Short Explanation

Issued capital equals shares offered. Offered shares = 2,00,000. Face value = Rs. 10.

✅ Correct Answer Explanation

Issued Capital is the portion of authorised capital offered to the public. Calculation: 200000 × 10 = 2000000 Thus, Issued Capital = Rs. 20,00,000. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Represents authorised capital.
Option B → Incorrect calculation.
Option C → Does not represent issued amount.

🎯 Strategy

Used

Substitution

Application:

Number of issued shares multiplied by face value.

Final Logic:

Issued Capital = Shares Offered × Face Value.

🧠 Memory Trick

"Issued = Offered Shares"

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

6 Which formula correctly represents the 'Unissued Capital' of a company?

A Issued Capital - Subscribed Capital

B Called-up Capital - Paid-up Capital

C Authorised Capital - Issued Capital

D Subscribed Capital - Called-up Capital

💡 Short Explanation

Unissued capital is unused portion. It remains within authorised limit. Formula subtracts issued capital.

✅ Correct Answer Explanation

Unissued Capital refers to the portion of authorised capital not yet issued to the public. Formula: Unissued Capital = Authorised Capital − Issued Capital Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Represents unsubscribed portion.
Option B → Represents calls in arrears concept.
Option D → Unrelated formula.

🎯 Strategy

Used

Formula Identification

Application:

The relationship between authorised and issued capital was applied.

Final Logic:

Unused authorised portion = Unissued capital.

🧠 Memory Trick

"Authorised Minus Issued"

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

7 Arrange the logical sequential steps involved when a company issues shares for public subscription:
1. Allotment of Shares
2. Issue of Prospectus
3. Receipt of Applications

A 2, 3, 1

B 1, 2, 3

C 3, 2, 1

D 2, 1, 3

💡 Short Explanation

Prospectus is issued first. Applications are received next. Shares are allotted afterward.

✅ Correct Answer Explanation

Correct sequence: 1. Issue of Prospectus 2. Receipt of Applications 3. Allotment of Shares Thus, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Allotment cannot occur first.
Option C → Prospectus must precede applications.
Option D → Applications occur before allotment.

🎯 Strategy

Used

Sequential Logic

Application:

The chronological order of share issue was arranged.

Final Logic:

Prospectus → Applications → Allotment.

🧠 Memory Trick

"PAA Sequence"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Share Issue Process – Page X

8 In a scenario where a company offers 2,00,000 shares to the public and receives applications for 2,50,000 shares, how is this fact of oversubscription reflected in the final Subscribed Capital books?

A Subscribed capital is immediately recorded as 2,50,000 shares.

B The fact of oversubscription is not reflected in the books; the allotment will be equal to the offer (2,00,000 shares).

C The company is forced to increase its authorised capital to 2,50,000 shares.

D The extra 50,000 shares are mandatorily placed into reserve capital.

💡 Short Explanation

Subscribed capital depends on allotment. Oversubscription applications exceed issue. Final allotment equals offered shares.

✅ Correct Answer Explanation

Although applications were received for 2,50,000 shares, the company can allot only 2,00,000 shares offered. Therefore, subscribed capital recorded in books equals allotted shares, not applications received. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Applications do not automatically become subscribed capital.
Option C → Authorised capital increase is unnecessary.
Option D → Excess applications are not reserve capital.

🎯 Strategy

Used

Conceptual Understanding

Application:

Subscribed capital was linked with actual allotment.

Final Logic:

Subscribed capital reflects allotted shares only.

🧠 Memory Trick

"Allotted = Recorded"

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

📄 Passage

"It may happen that shareholders do not pay the call amount on due date. When any shareholder fails to pay the amount due on allotment or on any of the calls, such amount is known as 'Calls in Arrears'/'Unpaid Calls'. Calls in Arrears represent the debit balance of all the calls account. Such amount shall appear as 'Note to Accounts'."

According to the passage and capital structure, if a company has "called up" Rs. 8 per share on a Rs. 10 face value share, what does the Rs. 8 technically denote before payment is verified?

A Paid-up capital

B Reserve capital

C The portion of subscribed capital the company has asked shareholders to pay

D Unissued capital

💡 Short Explanation

Called-up capital means demanded amount. Company asked shareholders to pay Rs. 8. Payment may or may not be received yet.

✅ Correct Answer Explanation

Called-up capital refers to the amount that the company has demanded from shareholders out of subscribed capital. Here: Face value = Rs. 10 Amount demanded = Rs. 8 Thus, Rs. 8 represents the portion called up by the company. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Paid-up capital means amount actually received.
Option B → Reserve capital relates to winding up.
Option D → Unissued capital is not offered to public.

🎯 Strategy

Used

Conceptual Identification

Application:

The meaning of called-up capital was directly applied.

Final Logic:

Demanded amount = Called-up capital.

🧠 Memory Trick

"Called-up = Asked to Pay"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Called-up Capital – Page X

📄 Passage

If a shareholder defaults on paying the "allotment" instalment mentioned in the passage, what specific terminology is given to this unpaid amount?

A Reserve capital

B Uncalled capital

C Share forfeiture

D Calls in Arrears or Unpaid Calls

💡 Short Explanation

Unpaid due amount becomes arrears. Default occurred on allotment payment. Such unpaid amount is called calls in arrears.

✅ Correct Answer Explanation

When shareholders fail to pay allotment or call money on due date, the unpaid amount is termed Calls in Arrears or Unpaid Calls. Therefore, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Reserve capital is reserved for winding up.
Option B → Uncalled capital is not yet demanded.
Option C → Forfeiture is a later consequence, not the unpaid amount itself.

🎯 Strategy

Used

Definition Matching

Application:

The accounting term for unpaid calls was identified.

Final Logic:

Defaulted call amount = Calls in Arrears.

🧠 Memory Trick

"Arrears = Unpaid Calls"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Calls in Arrears – Page X

11 A company called up Rs. 8 per share on 2,00,000 subscribed shares. A shareholder holding 2,000 shares failed to pay the first call of Rs. 2 per share. Calculate the actual Paid-up Capital amount.

A Rs. 16,00,000

B Rs. 15,96,000

C Rs. 15,00,000

D Rs. 16,04,000

💡 Short Explanation

Total called-up amount is calculated first. Unpaid calls are deducted. Remaining amount becomes paid-up capital.

✅ Correct Answer Explanation

Total called-up capital: 200000 × 8 = 1600000 Calls in arrears: 2000 × 2 = 4000 Paid-up capital: 1600000 - 4000 = 1596000 Thus, Paid-up Capital = Rs. 15,96,000. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Calls in arrears were not deducted.
Option C → Incorrect computation.
Option D → Arrears cannot be added.

🎯 Strategy

Used

Substitution

Application:

Paid-up capital formula was directly applied.

Final Logic:

Paid-up Capital = Called-up Capital – Calls in Arrears.

🧠 Memory Trick

"Paid-up = Called-up – Arrears"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Paid-up Capital – Page X

12 According to Table F of the Companies Act, what is the maximum rate of interest that can be charged on Calls in Arrears if the company's articles are silent in this regard?

A 10% p.a.

B 12% p.a.

C 5% p.a.

D 6% p.a.

💡 Short Explanation

Table F provides default rule. Articles are silent here. Maximum rate allowed is 10%.

✅ Correct Answer Explanation

If the Articles of Association are silent, Table F allows interest on Calls in Arrears up to a maximum of 10% per annum. Therefore, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Applies to calls in advance.
Option C → Incorrect statutory rate.
Option D → Not prescribed.

🎯 Strategy

Used

Legal Recall

Application:

The default Table F rate was recalled.

Final Logic:

Calls in arrears maximum interest = 10%.

🧠 Memory Trick

"Arrears = 10%"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Interest on Calls in Arrears – Page X

13 At what point in time can a company usually collect its general 'Uncalled Capital'?

A Only during the immediate incorporation of the company.

B Only when the company is in the process of winding up.

C It can never be legally collected.

D Any time when the company needs further funds for operations.

💡 Short Explanation

Uncalled capital is not yet demanded. Company may call it later. Additional funds trigger collection.

✅ Correct Answer Explanation

General uncalled capital may be collected whenever the company requires further funds for operations. Thus, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → It need not be collected immediately.
Option B → This applies specifically to reserve capital.
Option C → Uncalled capital is legally collectible.

🎯 Strategy

Used

Conceptual Understanding

Application:

Difference between uncalled and reserve capital was identified.

Final Logic:

General uncalled capital may be demanded anytime.

🧠 Memory Trick

"Uncalled Today, Called Tomorrow"

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

14 Assertion (A): Reserve capital is a specific portion of uncalled capital.
Reason (R): Reserve capital can be utilized by the company to write off preliminary expenses.

A Both A and R are true.

B A is true but R is false.

C A is false but R is true.

D Both A and R are false.

💡 Short Explanation

Reserve capital is part of uncalled capital. It is reserved only for winding up. It cannot write off preliminary expenses.

✅ Correct Answer Explanation

Assertion is true because reserve capital is a portion of uncalled capital reserved for specific purposes. Reason is false because reserve capital is available only during winding up and cannot be used for writing off preliminary expenses. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Reason is incorrect.
Option C → Assertion is true.
Option D → Assertion is legally correct.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

Reserve capital usage rules were evaluated carefully.

Final Logic:

Reserve capital is restricted to winding up.

🧠 Memory Trick

"Reserve Means Reserved"

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

15 Which exact portion of share capital is kept aside STRICTLY for use only in the event of the company being wound up?

A Reserve Capital

B Authorised Capital

C Subscribed Capital

D Paid-up Capital

💡 Short Explanation

Reserve capital is specially reserved. It becomes usable only during winding up. It protects creditors.

✅ Correct Answer Explanation

Reserve Capital refers to the portion of uncalled capital reserved exclusively for use during winding up. Thus, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Authorised capital is the maximum limit.
Option C → Subscribed capital belongs to shareholders.
Option D → Paid-up capital is already received.

🎯 Strategy

Used

Definition Matching

Application:

The winding-up-only characteristic identified reserve capital.

Final Logic:

Reserve Capital = Winding-up reserve.

🧠 Memory Trick

"Reserve for Closure"

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

16 Consider the following regarding Reserve Capital:
(I) It is available only for the creditors on winding up of the company.
(II) It is shown as a reserve in the balance sheet under reserves and surplus.

A Both are true.

B Both are false.

C Statement I is true and Statement II is false.

D Statement I is false and Statement II is true.

💡 Short Explanation

Reserve capital protects creditors. It is not shown under reserves and surplus. Statement II is incorrect.

✅ Correct Answer Explanation

Statement I is correct because reserve capital becomes available only to creditors during winding up. Statement II is false because reserve capital is not shown as a reserve under "Reserves and Surplus" in the balance sheet. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Statement II is false.
Option B → Statement I is true.
Option D → Statement I is not false.

🎯 Strategy

Used

Statement Verification

Application:

Accounting presentation rules were checked carefully.

Final Logic:

Reserve capital is not balance-sheet reserve.

🧠 Memory Trick

"Reserve Capital ≠ Reserve Fund"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Reserve Capital Presentation – Page X

17 Match the types of shares/capital to their correct descriptions:

List 1	List 2
1. Equity Shares	a. Shares not enjoying preferential rights
2. Preference Shares	b. Preferential right to dividend
3. Issued Capital	c. Part of authorised capital offered to the public
4. Uncalled Capital	d. Part of subscribed capital not yet called up

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

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

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

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

💡 Short Explanation

Equity shares have no preference rights. Preference shares enjoy priority dividend. Issued capital is offered to public.

✅ Correct Answer Explanation

Correct matching: 1. Equity Shares → c. Shares not enjoying preferential rights 2. Preference Shares → a. Preferential right to dividend 3. Issued Capital → d. Part of authorised capital offered to public 4. Uncalled Capital → b. Part of subscribed capital not yet called up Thus, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Equity and preference shares are mismatched.
Option C → Multiple incorrect pairings.
Option D → Entire matching sequence incorrect.

🎯 Strategy

Used

Option Grouping

Application:

Each term was matched with its defining feature.

Final Logic:

Only Option A correctly matches all.

🧠 Memory Trick

"Preference Gets Priority"

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

18 Instead of opening an individual capital account for every single shareholder, how are the capital contributions collectively recorded in accounting?

A Merged under the Debentures Account

B Merged under the Creditors Account

C Merged into a common 'Share Capital Account'

D Merged directly into the Cash Account

💡 Short Explanation

Companies may have many shareholders. Separate accounts become impractical. One consolidated Share Capital Account is maintained.

✅ Correct Answer Explanation

Because companies may have thousands of shareholders, accounting records contributions collectively in a common Share Capital Account. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Debentures represent loans.
Option B → Shareholders are not creditors.
Option D → Cash account only records receipts.

🎯 Strategy

Used

Practical Accounting Logic

Application:

Accounting convenience and classification were considered.

Final Logic:

Share contributions are consolidated in Share Capital Account.

🧠 Memory Trick

"One Capital Account for Many Owners"

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

19 Arrange the following sub-classifications of share capital as they typically appear top-to-bottom in the Notes to Accounts:
1. Subscribed but not fully paid up
2. Issued Capital
3. Authorised Capital
4. Subscribed and fully paid up

A 1, 2, 3, 4

B 4, 3, 2, 1

C 2, 3, 4, 1

D 3, 2, 4, 1

💡 Short Explanation

Presentation begins with authorised capital. Issued capital follows. Fully paid subscribed capital appears before partly paid.

✅ Correct Answer Explanation

Typical Notes to Accounts presentation order: 1. Authorised Capital 2. Issued Capital 3. Subscribed and Fully Paid-up Capital 4. Subscribed but not Fully Paid-up Capital Thus, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Reverse arrangement.
Option B → Incorrect presentation structure.
Option C → Authorised capital must appear first.

🎯 Strategy

Used

Sequential Arrangement

Application:

Balance sheet presentation sequence was recalled.

Final Logic:

Authorised → Issued → Fully Paid → Partly Paid.

🧠 Memory Trick

"AIFP Sequence"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Notes to Accounts – Page X

20 In the Notes to Accounts, how are 'Calls in Arrears' mathematically treated when presenting share capital?

A Added to Authorised Capital

B Deducted from Subscribed but not fully paid up capital

C Deducted from Issued Capital

D Added to Reserve Capital

💡 Short Explanation

Calls in arrears are unpaid amounts. They reduce paid-up presentation. Deduction is made in Notes to Accounts.

✅ Correct Answer Explanation

Calls in Arrears represent unpaid amounts due from shareholders and are deducted while presenting subscribed but not fully paid-up capital. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Authorised capital is unaffected.
Option C → Issued capital is not reduced.
Option D → Calls in arrears are not reserves.

🎯 Strategy

Used

Accounting Presentation Logic

Application:

The treatment of unpaid share capital was identified.

Final Logic:

Arrears reduce the paid-up amount shown.

🧠 Memory Trick

"Arrears Reduce Capital"

📚 Class XI – Accountancy – Chapter: Accounting for Share Capital – Topic: Notes to Accounts – Page X

CUET UG Accountancy Booster Test 1 Share Capital

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