MCQ on Issue of Shares and Share Capital [Multiple Choice Questions and Answers]

MCQ on Issue of Shares and Share Capital
For Class 12 & B. Com
(CBSE, ASHEC and other state boards)

In this page, you will get MCQ on Issue of Shares and Share Capital 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 Equity Shares and Preference Shares

Equity Share: 

Preference Share: 

Share Capital: 

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

1. Maximum permitted capital of the company is known as:

a) Authorised capital

b) Issued capital

c) Subscribed capital

d) Called of capital

Ans: a) Authorised capital

2. Equity shareholders and preference shareholders are:

a) Members OR owners.

b) Creditors.

c) Customers of the company.

d) Lenders

Ans: a) Members OR owners.

3. A public limited company cannot issue:

a) Equity shares

b) Preference shares

c) Sweat Equity Shares

d) Deferred shares

Ans: d) Deferred shares

4. 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.

Ans: b) Reserve capital.

5. Premium on issue of shares cannot be used for:

a) Premium on redemption of preference shares

b) Issue of bonus shares.

c) Remuneration to management.

d) For writing of preliminary expenses

Ans: c) Remuneration to management.

6. Premium on issue of shares can be used for:

a) To buy back its own shares

b) Issue of bonus shares.

c) For writing of preliminary expenses

d) All of the above

Ans: d) All of the above

7. Balance of shares forfeited account after reissue is transferred to:

a) Reserve Fund.

b) Profit & Loss Account.

c) Share Capital Account.

d) Capital Reserve account

Ans: d) Capital Reserve account

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8. Balance sheet shows:

a) Financial position of a company

b) Cash flow of a company

c) Earning efficiency of a company

d) Flow of Funds

Ans: a) Financial position of a company

9. Profit and loss account shows:

a) Financial position of a company

b) Cash flow of a company

c) Earning or operating efficiency of a company

d) Flow of Funds

Ans: c) Earning efficiency of a company

10. Which of the following are the characteristics 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 separate body can sue and be sued in its own name.

d) Perceptual succession.

e) All of the above.

Ans: e) All of the above.

11. 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.

Ans: d) Reserve Capital.

12. Share application and allotment account is a:

a) Personal account.

b) Real account.

c) Nominal account.

Ans: a) Personal account.

13. 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.

Ans: b) Reserves and surplus.

14. As per Section 52 of the company’s 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.

Ans: b) Purchase of fixed assets.

16. Penalty for delay in refunding application money @ ___ after the expiry of 60 days of the receipt of application money

a) 6%.

b) 5%.

c) 12% p.a.

d) 20%.

Ans: c) 12% p.a.

17. 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 arrears.

d) Issued capital is that part of authorised capital which is applied by the public and allotted by company.

Ans: 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 arrears.

18. 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) All companies having share capital is required to obtain certificate of commencement of business.

Ans: c) A Public limited company can commence business as soon as it is incorporated.

19. 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.

Ans: d) Register of debenture holders.

20. 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.

Ans: d) Agenda book.

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

21. 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.

Ans: d) When application money is received but balance sheet is prepared before allotment of shares.

22. 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.

Ans: d) All of the above.

23. 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) Sweat Equity 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.

Ans: d) All of the above.

24. 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 company’s act, only preference shares which are redeemable within 20 years can be issued.

Ans: c) A company can raise funds beyond its Authorised capital.

MCQ on Issue of Shares and Share Capital
State the following statements whether ‘true’ or ‘false’

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

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

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

28. Only sweat equity shares can be issued at a discount.       True

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

30. Securities premium once received cannot be cancelled.          True

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

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

33. As per SEBI guidelines, a new company (Less than 12 months) without any track record can issue share at a premium.      False

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

35. A Public company having share capital can commence business as soon as it is incorporated. False

MCQ on Issue of Shares and Share Capital

Match the Following

1. Match the following: Minimum number of members in:

a) Private Company.	2 members.
b) Public Company.	7 members.
c) One person company	1 Member
d) Partnership Firm	2 Members
e) LLP	2 Members

 2. Match the following: Maximum number of members in:

a) Private Company.	200 members.
b) Public Company.	Any number of members/Limited upto number of shares.
c) Partnership Firm.	100. But rule 14 of the Companies Act restrict it to 50
d) LLP	There is no limit on maximum number of partners.

 3. Match the following: Minimum Capital: (No Minimum capital is necessary as per Companies Amendment Act’ 2015)

a) Private Company.	1 lac (Previously).
b) Public Company.	5 lacs (Previously).

 4. Match the following:

a) Interest on calls in advance.	12% p.a.
b) Interest on calls in arrears.	10% p.a.
c) Minimum subscription in case of public company.	90% of the entire issue within 90 days.
d) Minimum application money in case of public limited company.	5% of the nominal face value [Sec.39] As per SEBI guidelines 25% of the issue price.
e) Maximum Rate of discount.	10% of the nominal value of share.

 5. Match the following with relevant sections:

a) Definition of company.	Section 2(20).
b) Issue of share at a premium.	Section 52.
c) Issue of share at a discount.	Section 53.
d) Books of accounts.	Section 128.
e) Sweat Equity Share.	Section 54.

 6. 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 public company.
d) Chartered companies.	Incorporated under special charter by the king or sovereign.

 7. Minimum and Maximum number of directors:

a) Public Company.	Minimum: 3. Maximum: 15 (Not applicable to govt. company).
b) Private Company.	Minimum: 2. Maximum: 15.
c) One Person Company.	Minimum: 1. Maximum: 15.

 8. Minimum number of Quorum:

a) Public Company.	Minimum: 5.
b) Private Company.	Minimum: 2.
c) One Person Company.	Waived.

 9. Match the following:

a) Rematerialization.	Conversion of electronic securities into physical form.
b) Dematerialization.	Conversion 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) Employee’s stock option schemes.	Option given to the whole time directors, officers and employees to purchase securities.