CUET UG Accountancy Booster Test 3 Kinds of Companies -

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CUET UG Accountancy Booster Test 2 Kinds of Companies

⏱️ 30 Minutes

❓ 20 Questions

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

CUET UG Accountancy Booster Test 2 Kinds of Companies

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QUESTION 1 OF 20

📄 Passage

"The liability of the members of the company is limited to the extent of unpaid amount of the shares held by them. In the case of the companies limited by guarantee, the liability of its members is limited to the extent of the guarantee given by them in the event of the company being wound up. When there is no limit on the liability of its members, the company is called an unlimited company."

According to the passage, the core analytical differentiator for liability-based classification is:

Answer Review

📄 Passage

According to the passage, the core analytical differentiator for liability-based classification is:

A The total number of members actively engaged in the company

B The precise extent of financial responsibility of the members

C The maximum number of shares issued to the public

D The nationality and residency of the holding members

💡 Short Explanation

Liability classification depends on member responsibility. Financial exposure determines company type. Different companies impose different liability limits.

✅ Correct Answer Explanation

The passage clearly explains that companies are classified according to the extent of liability borne by members: limited by shares, limited by guarantee, or unlimited liability. Thus, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Member participation is unrelated.
Option C → Share issue size does not determine liability classification.
Option D → Nationality has no role in liability basis.

🎯 Strategy

Used

Passage-Based Identification

Application:

The central theme of the passage was identified directly.

Final Logic:

Liability classification depends on member financial responsibility.

🧠 Memory Trick

"Liability = Financial Exposure"

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

📄 Passage

If classifying purely on a membership basis instead, which of the following is NOT a valid recognized category?

A Private Company

B Public Company

C One Person Company (OPC)

D Unlimited Company

💡 Short Explanation

Membership classification includes OPC, private, and public companies. Unlimited company belongs to liability classification. Hence it is not membership-based.

✅ Correct Answer Explanation

Membership-based classification includes: OPC, Private Company, Public Company. Unlimited Company belongs to liability-based classification. Therefore, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Valid membership-based category.
Option B → Valid membership-based category.
Option C → Also classified on membership basis.

🎯 Strategy

Used

Conceptual Elimination

Application:

Membership basis and liability basis were differentiated.

Final Logic:

Unlimited company relates to liability, not membership.

🧠 Memory Trick

"Unlimited = Liability Basis"

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

3 Mr. X owns 1,000 shares of Rs. 10 each in an unlimited company. He has paid Rs. 6 per share. The company goes into liquidation with a massive debt that company properties cannot cover. What is Mr. X's actual liability?

A Unlimited, extending fully to his private property

B Rs. 4,000 only

C Rs. 10,000 only

D Rs. 6,000 only

💡 Short Explanation

Unlimited companies impose unlimited liability. Personal assets may be used. Liability exceeds unpaid share amount.

✅ Correct Answer Explanation

In an unlimited company, liability is not restricted to unpaid share capital. Creditors may proceed against members' private property if company assets are insufficient. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Liability is not capped at unpaid amount.
Option C → Face value does not limit liability.
Option D → Paid amount is irrelevant here.

🎯 Strategy

Used

Conceptual Application

Application:

Unlimited liability principle was directly applied.

Final Logic:

Unlimited company = Unlimited personal exposure.

🧠 Memory Trick

"No Ceiling on Liability"

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

4 In a company limited by shares, if a liability requires enforcing payment during active existence as well as during winding up, this liability is strictly capped at:

A The current market trading price of the share

B The intrinsic accounting value of the share

C The nominal value of shares held

D The call money received to date

💡 Short Explanation

Liability in share companies is limited. Maximum liability equals nominal value. Members cannot be forced beyond this amount.

✅ Correct Answer Explanation

In companies limited by shares, member liability is restricted to the nominal value of shares held (to the extent unpaid). Thus, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Market price is irrelevant.
Option B → Intrinsic value has no legal significance here.
Option D → Liability may exceed current calls received.

🎯 Strategy

Used

Legal Recall

Application:

Shareholder liability rules were applied.

Final Logic:

Maximum liability = Nominal share value.

🧠 Memory Trick

"Liability Stops at Face Value"

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

5 A single member guarantees Rs. 50,000 in a guarantee company. During winding up, the company's total debts are calculated to be only Rs. 20,000. How much can legally be enforced upon him?

A Rs. 50,000

B Rs. 0

C Rs. 70,000

D Rs. 20,000

💡 Short Explanation

Guarantee represents maximum liability. Actual liability depends on debt requirement. Only necessary amount is enforceable.

✅ Correct Answer Explanation

Though the member guaranteed Rs. 50,000, only Rs. 20,000 is needed to settle company debts during winding up. Hence, only Rs. 20,000 can legally be enforced. Thus, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Guarantee is only maximum limit.
Option B → Liability arises during winding up.
Option C → Liability cannot exceed actual debts.

🎯 Strategy

Used

Conceptual Calculation

Application:

Actual debt requirement was compared with guarantee limit.

Final Logic:

Liability enforced = Actual debt needed.

🧠 Memory Trick

"Guarantee Sets Maximum, Not Automatic Payment"

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

6 Match the Following conceptually:

List 1	List 2
1. Calls in Arrears	a. Unpaid amount on called-up capital
2. Guarantee Company	b. Liability explicitly surfaces only on winding up
3. Unlimited Company	c. Members' private property is directly liable
4. Public Company	d. Subsidiary of this is deemed the same classification

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

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

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

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

💡 Short Explanation

Calls in arrears are unpaid called-up amounts. Guarantee liability arises on winding up. Unlimited companies expose private assets.

✅ Correct Answer Explanation

Correct matching: 1. Calls in Arrears → c. Unpaid amount on called-up capital 2. Guarantee Company → a. Liability explicitly surfaces only on winding up 3. Unlimited Company → d. Members' private property is directly liable 4. Public Company → b. Subsidiary of this is deemed the same classification Thus, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Multiple incorrect pairings.
Option C → Public company mismatched.
Option D → Calls in arrears incorrectly matched.

🎯 Strategy

Used

Option Grouping

Application:

Each concept was linked with its defining feature.

Final Logic:

Only Option B correctly matches all.

🧠 Memory Trick

"Arrears-Unpaid, Guarantee-Winding Up"

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

7 Assertion: Creditors can claim their dues directly from members of an unlimited company if the company's property is insufficient.
Reason: Unlimited companies do not technically exist anywhere globally.

A Both A and R are true, and R is the correct explanation.

B Both A and R are true, but R is not the correct explanation.

C A is true, R is false.

D Both A and R are false.

💡 Short Explanation

Unlimited liability allows creditor claims. Unlimited companies do legally exist. Reason is incorrect.

✅ Correct Answer Explanation

Assertion is true because members of unlimited companies may be personally liable for debts. Reason is false because unlimited companies do legally exist. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Reason is false.
Option B → Reason is incorrect.
Option D → Assertion is true.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

Unlimited liability concept was evaluated.

Final Logic:

Unlimited companies legally exist.

🧠 Memory Trick

"Unlimited Companies Are Real"

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

8 Regarding unlimited companies, analyze the statements:
1. Members' private property can be used for company debts.
2. They are strictly prohibited by the Companies Act, 2013 from being formed in India.

A Only 1 is correct

B Only 2 is correct

C Both are correct

D Neither is correct

💡 Short Explanation

Unlimited liability extends to private property. Unlimited companies are legally permissible. Statement 2 is false.

✅ Correct Answer Explanation

Statement 1 is correct because members' personal assets may be used. Statement 2 is false because unlimited companies are not prohibited in India. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Statement 1 is true.
Option C → Statement 2 is incorrect.
Option D → Statement 1 is correct.

🎯 Strategy

Used

Statement Verification

Application:

Unlimited company provisions were analyzed.

Final Logic:

Unlimited companies are legal but risky.

🧠 Memory Trick

"Unlimited Liability Uses Private Assets"

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

9 A public company's definitional criteria specifically dictates that it is one which is not a private company and:

A Has strictly only one member

B Restricts the transfer of shares within its family members

C Is fundamentally an unlimited company by design

D Is not a subsidiary of a private company

💡 Short Explanation

Public company differs from private company. Subsidiary relationship affects classification. Public companies are not subsidiaries of private companies.

✅ Correct Answer Explanation

A public company is defined as one which: is not a private company, and is not a subsidiary of a private company. Therefore, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → OPC condition, not public company condition.
Option B → Public companies allow free transfer.
Option C → Public companies need not be unlimited companies.

🎯 Strategy

Used

Legal Recall

Application:

Definition criteria for public company were applied.

Final Logic:

Public company cannot be subsidiary of private company.

🧠 Memory Trick

"Public Stands Independent"

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

10 Which conceptual formula accurately depicts a Public Company's characteristic regarding share transfer permissions?

A Transfer Permission = Freely transferable (No prior consent necessary)

B Transfer Permission = Subject to Directors' written approval only

C Transfer Permission = Restricted exclusively to 200 members

D Transfer Permission = Strictly Prohibited by Articles

💡 Short Explanation

Public shares move freely. Prior approval is unnecessary. Free transferability is core feature.

✅ Correct Answer Explanation

Public company shares are freely transferable without requiring prior consent from directors or shareholders. Thus, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Restriction resembles private company rules.
Option C → 200-member limit applies to private companies.
Option D → Public companies cannot prohibit transfer.

🎯 Strategy

Used

Conceptual Identification

Application:

Public company transfer rules were identified.

Final Logic:

Public shares transfer freely.

🧠 Memory Trick

"Public Shares Flow Freely"

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

11 The strict restriction on the right to transfer shares in a private company implies that conceptually:

A Shares cannot be sold under any circumstances whatsoever

B Shares can only be sold directly back to the government

C The manner of transfer is prescribed and structurally restricted by its Articles

D Shares are actively traded openly on the stock exchange

💡 Short Explanation

Private companies restrict transfer rights. Articles prescribe transfer procedures. Shares are not freely traded publicly.

✅ Correct Answer Explanation

Private company shares may be transferred only according to restrictions contained in the Articles of Association. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Transfer is restricted, not impossible.
Option B → Government buyback is irrelevant.
Option D → Private company shares are not openly traded.

🎯 Strategy

Used

Conceptual Understanding

Application:

Restrictions under Articles were identified.

Final Logic:

Private transfer depends on Articles.

🧠 Memory Trick

"Private Shares Need Permission Rules"

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

12 A private company has 195 standard individual members, plus 10 current employees who hold shares. Analytically, does it violate the maximum member limit rule?

A Yes, the total is 205 which exceeds 200

B No, employees are structurally excluded from the 200 limit calculation

C Yes, because employees cannot legally hold shares

D No, the absolute limit is 500

💡 Short Explanation

Employee-members are excluded from count. Effective count remains 195. Limit of 200 is not violated.

✅ Correct Answer Explanation

Current employee-members are excluded while calculating the 200-member limit in a private company. Thus: Counted members = 195 Limit not exceeded. Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Employees are excluded.
Option C → Employees may legally hold shares.
Option D → Maximum limit is not 500.

🎯 Strategy

Used

Numerical Rule Application

Application:

Employee exclusion rule was applied.

Final Logic:

Only non-excluded members are counted.

🧠 Memory Trick

"Exclude Employees Before Counting"

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

13 An OPC currently has paid-up share capital of Rs. 40 Lakhs. They analytically plan to issue Rs. 15 Lakhs more. Can they retain their OPC status under the current legal conditions?

A No, the total will be 55 Lakhs (exceeding the 50 Lakhs limit)

B Yes, there is no maximum capital limit for an OPC

C No, OPCs cannot issue shares conceptually

D Yes, the limit is currently Rs. 1 Crore

💡 Short Explanation

OPC paid-up capital limit applies. New total becomes Rs. 55 Lakhs. Limit of Rs. 50 Lakhs is exceeded.

✅ Correct Answer Explanation

Calculation: 40 Lakhs + 15 Lakhs = 55 Lakhs Since Rs. 55 Lakhs exceeds the OPC limit of Rs. 50 Lakhs, OPC status cannot continue. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → OPCs do have prescribed limits.
Option C → OPCs may issue shares.
Option D → Rs. 1 Crore is incorrect here.

🎯 Strategy

Used

Substitution

Application:

Capital limit was compared with projected total.

Final Logic:

55 Lakhs > 50 Lakhs.

🧠 Memory Trick

"OPC Limit = 50 Lakhs"

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

14 Which specific operational activities are explicitly prohibited for an OPC according to the Companies (Incorporation) Rules, 2014?

A Trading of physical goods globally

B Exporting software and technical services

C Non-banking financial investment activities

D Hiring more than 100 contractual employees

💡 Short Explanation

OPC restrictions apply to NBFC-type operations. Financial investment activities are prohibited. Other business activities are allowed.

✅ Correct Answer Explanation

Under Companies (Incorporation) Rules, 2014, OPCs cannot engage in non-banking financial investment activities. Thus, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Trading is permissible.
Option B → Export services are allowed.
Option D → No such restriction exists.

🎯 Strategy

Used

Legal Recall

Application:

Restricted OPC activities were identified.

Final Logic:

OPC cannot operate as NBFC-type entity.

🧠 Memory Trick

"OPC ≠ Financial Investment Company"

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

15 Arrange the entities logically by their minimum required members (Lowest to Highest):
1. Private Company
2. One Person Company (OPC)
3. Public Company

A 1, 2, 3

B 2, 1, 3

C 3, 2, 1

D 2, 3, 1

💡 Short Explanation

OPC needs 1 member. Private company needs 2 members. Public company needs 7 members.

✅ Correct Answer Explanation

Minimum members: OPC → 1 Private Company → 2 Public Company → 7 Thus, ascending order: 2 → 1 → 3 Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Private company cannot precede OPC.
Option C → Reverse order.
Option D → Public company cannot require fewer than private company.

🎯 Strategy

Used

Sequential Arrangement

Application:

Minimum membership requirements were ordered numerically.

Final Logic:

1 < 2 < 7

🧠 Memory Trick

"OPC–Private–Public"

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

16 Assertion: A public company has a strict legal maximum limit of 200 members.
Reason: It prevents monopolistic control over shares.

A Both A and R are true, and R is the correct explanation.

B Both A and R are true, but R is not the correct explanation.

C A is true, R is false.

D Both A and R are false.

💡 Short Explanation

Public companies have no maximum member limit. Reason is unsupported and incorrect. 200-member limit applies to private companies.

✅ Correct Answer Explanation

Assertion is false because public companies have no prescribed maximum number of members. Reason is also false because the statement does not explain any valid legal restriction. Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Assertion itself is false.
Option B → Both are not true.
Option C → Assertion is incorrect.

🎯 Strategy

Used

Assertion–Reason Analysis

Application:

Public company membership rules were verified.

Final Logic:

Public companies may have unlimited members.

🧠 Memory Trick

"Public = Unlimited Membership"

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

17 If a company attempts an issue of Rs. 50,00,000 worth of shares, but receives applications for only Rs. 44,00,000. According to SEBI guidelines (90% rule), what must the company do?

A Proceed with allotment on a pro-rata basis

B Call for more money from the existing applicants

C Forthwith refund the entire subscription amount received

D Transfer the deficit to capital reserve

💡 Short Explanation

Minimum subscription required = 90%. Rs. 44 Lakhs is below required amount. Allotment cannot proceed.

✅ Correct Answer Explanation

Required minimum subscription: 90% \times 5000000 = 4500000 Actual subscription = Rs. 44,00,000, which is below Rs. 45,00,000. Hence, the company must refund the entire subscription amount. Therefore, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Allotment prohibited below minimum subscription.
Option B → Company cannot compel additional money.
Option D → Deficit cannot be transferred to reserve.

🎯 Strategy

Used

Substitution

Application:

SEBI 90% rule was mathematically applied.

Final Logic:

44 Lakhs < 45 Lakhs.

🧠 Memory Trick

"Below 90% → Refund"

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

18 If a delay in refunding the subscription amount occurs beyond 8 days from the date of closure of the subscription list, what is the exact legal penalty?

A The company shall be liable to pay the amount with interest at 15%

B The directors are imprisoned immediately

C The company pays a flat 10% interest rate penalty

D There is no financial penalty, just a warning

💡 Short Explanation

Delay creates statutory liability. Interest penalty becomes payable. Rate prescribed is 15%.

✅ Correct Answer Explanation

If refund is delayed beyond 8 days after closure, the company must refund the amount along with interest at 15%. Hence, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Immediate imprisonment is incorrect.
Option C → 10% is not prescribed here.
Option D → Financial penalty definitely applies.

🎯 Strategy

Used

Legal Recall

Application:

Penalty provision for delayed refund was identified.

Final Logic:

Late refund attracts 15% interest.

🧠 Memory Trick

"Late Refund = 15% Interest"

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

19 In analyzing the structure of companies, what makes a private company fundamentally different from a public company in raising capital?

A It issues debentures exclusively instead of shares

B It has a substantially higher minimum subscription limit

C It does not structurally have authorized capital

D It cannot freely transfer shares, thereby restricting public trading

💡 Short Explanation

Private companies restrict transferability. Public companies allow free trading. This limits capital-raising flexibility.

✅ Correct Answer Explanation

Private companies restrict share transfer through their Articles, unlike public companies where shares are freely transferable. Thus, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Private companies may also issue shares.
Option B → No such higher subscription rule exists.
Option C → Private companies also have authorised capital.

🎯 Strategy

Used

Comparative Analysis

Application:

Capital-raising structures were compared.

Final Logic:

Transfer restrictions limit public trading.

🧠 Memory Trick

"Private Restricts Trading"

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

20 Match the Following conceptually:

List 1	List 2
1. OPC	a. Requires only a natural Indian citizen
2. Private Company	b. Minimum 2 members required
3. Public Company	c. Subsidiary of a private company is not this
4. Guarantee Company	d. Liability activates at winding up

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

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

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

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

💡 Short Explanation

OPC requires natural Indian citizen. Private company needs minimum two members. Guarantee liability activates during winding up.

✅ Correct Answer Explanation

Correct matching: 1. OPC → b. Requires only a natural Indian citizen 2. Private Company → c. Minimum 2 members required 3. Public Company → a. Subsidiary of a private company is NOT this 4. Guarantee Company → d. Liability activates at winding up Thus, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → OPC incorrectly matched.
Option C → Multiple mismatches occur.
Option D → Private company incorrectly matched.

🎯 Strategy

Used

Option Grouping

Application:

Each company type was linked to its legal feature.

Final Logic:

Only Option B matches all correctly.

🧠 Memory Trick

"OPC-One, Private-Two"

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

CUET UG Accountancy Booster Test 2 Kinds of Companies

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