MCQs on Right Shares and Bonus Shares [Multiple Choice Questions and Answers]

mcq on right shares and bonus shares

MCQs on Right Shares and Bonus Shares
Multiple Choice Questions and Answers 
For B.Com/CA/CS/CMA Exams

In this page, you will get MCQs on Right Shares and Bonus Shares which are useful for AHSEC and CBSE Class 12, B. Com and Various Professional Exams Like CA/CMA and CS.

We update this page frequently to add new questions. Chapter wise Corporate Accounting MCQs are also included in this post.

Introduction to Rights Shares

Rights Issue (RI) is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. 
The company is under legal obligation to offer first the further issue of the shares to its existing shareholders. But the holders have option either to accept it or to reject or renounce it. That is why this is called “Right Issue”.

Introduction to Bonus Shares

Accumulated profits and reserves of company can be capitalised in full or in part and converted into shares. Such Shares are distributed free of charge to the existing shareholders pro-rata to their holdings. Such free shares are known as bonus shares.
Bonus shares may be issued to make up the existing partly paid shares as fully paid. 

Choose the correct answer to the following questions from the given alternatives:

1. Right share are not offered to the existing equity shareholders if:

a) The company in general meeting has so decided by a special resolution.

b) Decided by an ordinary resolution and same has been approved by the central government.

c) Right shares are offered to existing shareholders only. 

d) Both a and b.

Ans: d) Both a and b.

(Hint: Sometimes it is issued to the outsiders if point a and b is satisfied.}

2.  Section 62 is not applicable to:

a) A private company.

b) Conversion of debenture into shares.

c) Option to subscribe for shares in the company attached to debentures issued or loan raised by the company.

d) All of the above.

Ans: d) All of the above.

3. Which of the following statement in false:

a) Bonus issue is made out of free reserves or securities premium collected in cash only.

b) Bonus shares can be issued out revaluation profit.

c) No bonus issue shall be made within 12 months of any public or right issue.

d) Company can issue bonus shares in any ratio.

Ans: b) Bonus shares can be issued out revaluation profit.

4. Which of the following Reserves which are not available for issue of fully paid bonus shares:

a) Profit and loss account.

b) Dividend equalisation reserve.

c) Capital reserve arising due to revaluation.

d) Capital redemption reserve.

Ans: c) Capital reserve arising due to revaluation.

5. Which of the following reserves which can be utilised to make partly paid shares into fully paid up:

a) Securities premium.

b) Capital redemption reserve.

c) Surplus arising from a change in the method of charging depreciation.

d) Capital reserve from sale of fixed assets in cash.

Ans: d) Capital reserve from sale of fixed assets in cash.

[Hint: Securities premium and Capital redemption reserves cannot be used to make partly paid shares fully paid up.]

6. Which of the following are free reserves?

a) Plant revaluation reserve.

b) Development rebate reserve.

c) Investment allowance reserve.

d) Capital reserve collected in cash.

Ans: d) Capital reserve collected in cash.

7. Which of the following can be used for issuing bonus shares??

a) General reserve

b) Dividend equalisation reserve

c) Securities premium reserve

d) All of the above

Ans: d) All of the above

8. Which of the following statement is false?

a) Bonus issue is made in lieu of dividend.

b) Bonus issue is not made unless the partly paid shares are made fully paid up.

c) Bonus issue must be implemented within 15 days from the date of such approval (if Shareholders’ approval is not required) or 2 months (if Shareholders’ approval is required).

d) Bonus is simply capitalisation of free reserves.

Ans: a) Bonus issue is made in lieu of dividend.

9. Guideline for issue of bonus shares are issued by:


b) RBI

c) Stock exchanges

d) Government

Ans: a) SEBI

10. To whom the bonus shares or rights shares can be issued?

a) Existing shareholders

b) Promoters

c) Company Directors

d) New Shareholders

Ans: a) Existing shareholders

Also Read: Corporate Accounting MCQs Chapterwise

Issue of Shares

Issue and Redemption of Debentures

Bonus and Rights Shares

Buy Back of Shares

Redemption of Preference Shares

Internal Reconstruction

External Reconstruction

Accounts of Holding Companies

Corporate Accounting 500 MCQs

11. Bonus shares are issued only to:

a) Debenture holders

b) Secured creditors

c) Equity shareholders

d) Preference shareholders

Ans: c) Equity shareholders

12. Which of the following document must authorise a company to issue bonus share?

a) Memorandum of Association

b) Articles of Association

c) Prospectus

d) Minutes

Ans: b) Articles of Association

13. Shares issued without any special rights attached to them are known as:

a) Ordinary shares

b) Rights shares

c) Bonus shares

d) Preference shares

Ans: a) Ordinary shares

14. Minimum time lag required between two bonus issue is:

a) 1 Month

b) 6 Months

c) 12 Months

d) 5 Years

Ans: c) 12 Months

15. A ltd is planning to raise funds by making right issue of equity shares to finance its expansion. The existing share capital of the company is one crore. Face value of the shares I Rs. 10 and Market Value is Rs. 40. The company made a right issue of 3 new shares for every 5 old shares @ Rs. 15. From the information given above calculate:

(a) Theoretical market price after right issue

a) 30.

b) 30.25.

c) 30.63.

d) 31.

Ans: c) 30.63.

(b) Value of Rights

a) 9.11.

b) 9.37.

c) 9.50.

d) 9.67.

Ans: b) 9.37.

(c) Percentage increase in share capital:

a) 40%.

b) 50%.

c) 60%.

d) 70%.

Ans: c) 60%.

(d) Percentage increase in total funds:

a) 80%.

b) 90%.

c) 75%.

d) 100%.

Ans: b) 90%.

State the following statements whether ‘true’ or ‘false’

1. As per Section 62 of the Companies Act 2013, Rights shares are issued after two years from the formation of a company or the expiry of one year from the first allotment of shares in the company whichever is earlier.    True

2. Right shares are first offered to the existing share holders.     True

3. As per SEBI guidelines right issue should be kept open for minimum 30 days and not be kept open for more than 60 days.        True

4. If after bonus issue the subscribed and paid up capital exceed the authorised share capital, a resolution shall be passed by the company to increase its authorised share capital.            True

5. Bonus shares can be issued at a premium.          True

6. Issue of bonus share must be provided in the articles of association of the company.       True

7. Bonus shares are issued to existing shareholders.  True

8. A resolution must be passed by the board of directors recommending its decision to issue bonus shares.      True

9. A company can issue bonus shares even if company has defaulted in payments of interest, debt and statutory dues.      False

10. Once the decision to make a bonus issue is announced, the same cannot be withdrawn.        True

11. The cost of right shares is added to the cost of investment.   True

12. Fully paid shares given by a company at free of cost to existing equity shareholder is called bonus shares.            True

13. At the time of issue of bonus share the company is saved from paying taxes.    False

14. Bonus shares are issued at a discounted price to the equity shareholders. False

15. The declaration of bonus in lieu of dividend can be made.      False