Sunday, April 19, 2015

Issue of Shares and Share Capital - Multiple Choice Questions and Answers

1. Match the following: Minimum number of members in
a)      Private Company
2 members
b)      Public Company
7 members

2. Match the following: Maximum number of members in:
a)      Private Company
50 members
b)      Public Company
Any number of members
c)       Partnership Firm
10 in case of banking business, 20 in case of trading business.

3. Match the following: Minimum Capital:
a)      Private Company
1 lac
b)      Public Company
5 lacs

4. Match the following:
a)      Interest on calls in advance
6% p.a.
b)      Interest on calls in arrear
5% p.a.
c)       Minimum subscription in case of public company
90% of the entire issue
d)      Minimum application money in case of public limited company
5% of the nominal face value
e)      Maximum Rate of discount
10% of the nominal value of share


5. Match the following with relevant sections:
a)      Definition of company
Section 3(1)(i)
b)      Issue of share at a premium
Section 78
c)       Issue of share at a discount
Section 79
d)      Books of accounts
Section 209

6. Which of the following statement is false:
a)      A company is a legal entity quite distinct from its members.
b)      A company can buy its own share
c)       A shareholder is the agent of the company
d)      Same person can agent and creditor of the company

7. Which of the following are the charactersitics of a company
a)      Liability of the members is limited upto the face value of shares held by them
b)      It is a voluntary association of persons.
c)       A company is a separte body can sue and be sued in its own name
d)      Perpectual succession
e)      All of the above

8. The term Company and Body corporate denote the same thing.                                           False

9. Body corporate does not include Co- operative society.                                                            True

10. Match the following:
a)      Statutory Company
Formed by special act of the legislature or parliament.
b)      Guarantee company
Liability of the member is limited upto the amount he guaranteed to contribute in the event of winding up.
c)       Deemed public company
Holds 25% of paid up capital of a pulic company
d)      Chartered companies
Incorporated under special charter by the king or sovereign

11. The quorum for a meeting in private company is two and for a public limited company is five.                              True

12. Minimum number of directors is two for a Pvt. Ltd company and three for a Limited company.            True

13. Which of the following capital is not shown in company’s balance sheet:
a)      Authorised capital
b)      Issued and Subscribed capital
c)       Called and paid up capital
d)      Reserve Capital

14. Permission from central government to issue share capital is required if Nominal capital exceeds Rs. 1 crore.                True

15. A company is said to be Deemed Public company if its Annual Turnover exceeds Rs. 25 crores.                            True

16. Share application and allotment account is a:
a)      Personal account
b)      Real account
c)       Nominal account

17. Discount of issue of share shows debit balance and hence shown on the assets side of the balance sheet under the head miscellaneous expenditure.                                                                            True

18. Securities premium account is shown on the liabilities side of the balance sheet under the head:
a)      Share capital
b)      Reserves and surplus
c)       Current liabilities

19. As per section 78 of the companies act, amount collected as premium on securities cannot be utilised for:
a)      Issuing fully paid bonus shares to the members
b)      Purchase of fixed assets
c)       Writing off preliminary expenses
d)      Buy back of its own shares
e)      Premium payable on redemption of preference shares

20. The portion of the authorised capital which can be called-up only on the liquidation of the company is called
a)      Authorised capital
b)      Reserve capital
c)       Issued capital
d)      Called up capital

21. Penalty for delay in refunding application money
a)      6%
b)      5%
c)       15%
d)      20%

22. Payment of interest on calls-in-advance is at the discretion of the company.                          False

23. Which of the following statement is false?
a)      Declared dividend should be classified in the balance sheet as a current liability.
b)      Dividends are usually paid as a percentage of paid-up-capital.
c)       A company can raise funds beyond its Authorised capital.
d)      As per the companies act, only preference shares which are redeemable within 20 years can be issued.

24. Which of the following statements are correct?
a)      Subscribed capital is that part of capital which is offered to the public for subscription.
b)      Called-up-capital is that part of the subscribed capital, that has been called up.
c)       Paid-up-capital = called-up-capital - calls in arrear
d)      Issued capital is that part of authorised capital which is applied by the public and allotted by company.

25. Which of the following statements are incorrect ?
a)      A company registered in india issues only Equity and Preference shares.
b)      The preference share is that part of share capital which enjoys preferential rights regarding repayment of Capital and payment of Dividend.
c)       A Public limited company can commence business as soon as it is incorporated.
d)      A private company can commence business after getting the certificate of incorporation.

26. Securities premium once received cannot be cancelled.                         True

27. Which of the following is not a statistical book of a company?
a)      Share application and allotment book
b)      Register of share warrants
c)       Register of shares and debentures transferred
d)      Register of debenture holders

28. Which of the following is not a statutory book of a company?
a)      Annual returns
b)      Minutes book
c)       Register of fixed deposits
d)      Agenda book

29. Technique used for marketing a public offer of equity shares of a company is called book building process.   True

30. Free pricing mechanism is used in pricing issue of share.                                         True

31. Match the following:
a)      Rematerialization
Conversion of electronic securities into physical form
b)      Dematerialization
Coversion of physical shares into electronic securities
c)       Sweat equity shares
Shares issued at a discount or consideration other than cash for providing know how or rights or value addition.
d)      Employess stock option schemes
Option given to the whole time directors, officers and employees to purchase securities.

32. Share capital suspense account is opened when:
a)      Balance sheet is not tallied
b)      When dividend is declared but not paid
c)       When shares are forfeited
d)      When application money is received but balance sheet is prepared before allotment of shares.

33. As per SEBI guidelines, A new company without any track record can issue share at a premium.                          False

34. A new company set up by existing companies with five year track record can issue share at premium provided:
a)      Participation of existing companies are not less that 50%
b)      Prospectus contains justification for issue price
c)       The issue price is made applicable to all new investors uniformly.
d)      All of the above

35. Issue of share at a discount must be authorised by a resolution passed by the company in general meeting and duly santioned by the central government.                                                   True

36. A company can issue share at a discount if
a)      One year have been elapsed since the date at which the company was allowed to commence business
b)      Shares issued at a discount must belong to a class of shares already issued
c)       Issue must take place within two must after the date of sanction by the court or within extended time.

d)      All of the above

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