Please refer to Accounting for Share Capital Class 12 Accountancy Important Questions with solutions provided below. These questions and answers have been provided for Class 12 Accountancy based on the latest syllabus and examination guidelines issued by CBSE, NCERT, and KVS. Students should learn these problem solutions as it will help them to gain more marks in examinations. We have provided Important Questions for Class 12 Accountancy for all chapters in your book. These Board exam questions have been designed by expert teachers of Standard 12.
Class 12 Accountancy Important Questions Accounting for Share Capital
Question. What is the nature of receipt of premium on issue of shares?
Answer : Capital Nature.
Question. State in brief, the SEBI guidelines regarding Debenture Redemption Reserve(DRR).
Answer : 12 As per SEBI guidelines, an amount equal to 50% of the debenture issue, must be transferred to DRR before the redemption begins.
Question. Why securities premium money can not be used for payment of cash dividend among shareholders?
Answer : It is restricted under section 78 of Indian Companies Act.
Question. Gupta Ltd has incurred a loss of Rs. 8,00,000 before payment of interest on debentures. The directors of the company are of the opinion that interest on debentures is payable only when company earn profit. Do you agree?
Answer : No’ because Interest on debentures is a charge against profit and not an appropriation of profit.
Question. Which companies are exempted from the obligation of creating DRR by SEBI?
Answer : The following companies are exempted from the obligation of creating DRR –
(i) A company which has issued debentures with a maturity of 18 months or less.
(ii) Infrastructure companies, which are wholly engaged in the business of developing, maintaining and operating infrastructure facilities.
Question. Name the method of redemption of debentures in which there is no requirement of creating Debenture Redemption Reserve.
Answer : Redemption of debentures by conversion.
Question. Krishna Ltd. With paid-up share capital of Rs. 60,00,000 has a balance of Rs. 15,00,000 in securities premium account. The company management does not want to carry over this balance. You are required to suggest the method for utilizing this premium money that would achieve the objectives of the management and maximize the return to shareholders.
Answer : Mention the provisions of section 78.
Question. What is the maximum rate of interest which the board of directors of a company can normally pay on calls-inadvance if the articles are silent on the matter of such interest?
Answer : According to table ‘A’ not exceeding 6 % p.a.
Question. What is the restriction on reissue of forfeited shares at discount?
Answer : A Company can reissue forfeited shares at a discount not more than amount forfeited on these shares.
Question. Can a company issue shares at a premium in the absence of any express authority in its articles?
Answer : Yes. [ Hint See section 78]
Question. Distinguish between a share and a Debenture.
Answer : 10 Basis of difference :
(i) Ownership
(ii) Return
(iii) Voting Right
(iv) Convertibility
Question. State with reason whether a company can issue its shares at a discount in its Initial Public Offer (IPO).
Answer : Section 79 Companies Act- the shares must be of a class already issued. So a company cannot issue shares at a discount in its Initial Public Offer.
Question. As per latest guidelines governing the servicing of debentures a company is required to create on special account. Name that account.
Answer : Debenture Redemption Reserve Account.
Question. Can share premium be utilised for the purchase of fixed assets?
Answer : No.
Question. 200 shares of Rs. 100 each issued at a discount of 10% were forfeited for the non payment of allotment money of Rs. 50 per share. The first and final call of Rs. 10 per share on these shares were not made. The forfeited share were reissued at Rs. 14 per share fully paid up.
Answer : Capital Reserve Rs. 600
Question. Virani Industries Ltd. issued 1,00,000, 10% Debentures of Rs. 10 each at a discount of 9% on April 1st, 2001 redeemable as follows:
31st March 2003 – 20,000 Debentures
31st March 2004 – 30,000 Debentures
31st March 2005 – 20,000 Debentures
31st March 2006 – Remaining Debentures
Calculate the amount of discount to be written off each year and prepare discount on issue of debentures account.
Answer : Amount of discount = Rs. 90,000
Discount to be written off:
2001-02 – Rs. 25,000
2002-03 – Rs. 25,000
2003-04 – Rs. 20,000
2004-05 – Rs. 12,500
2005-06 – Rs. 7,500
Question. X Ltd. invited applications for 11,000 shares of Rs. 10 each issued at 10% premium payable as:
On application Rs. 3 (including Rs. 1 premium)
On allotment Rs. 4 (including Rs. 1 premium)
On 1st Call Rs. 3
On 2nd & final call Rs. 2
Application were received for 24000 shares.
Category I : One fourth of the shares applied for allotted 2000 shares.
Category II: Three fourth the shares applied for allotted 9000 shares.
Remaining applicants were rejected. Mr. Mohan holding 300 shares out of category II failed to pay allotment and two calls and his shares were re issued @ Rs. 11 fully paid-up. Pass necessary journal entries.
Answer : Hint-
(i) Amount received on allotment Rs. 26,100.
(ii) Amount transferred to share forfeited A/C Rs. 900
(iii) Amount transferred to Capital Reserve Rs. 600.
Question. 500 shares of Rs. 100 each issued at a discount of 10% were forfeited for the non-payment of allotment money of Rs. 50 per share. The first and final call of Rs.10 per share on these shares were not made. The forfeited shares were reissued at Rs. 80 per share fully paid-up.
Answer : Capital Reserve Rs. 10,000
Question. X Ltd took over the assets of Rs. 6,60,000 and liabilities of Rs. 80,000, Y Ltd for Rs. 600,000. Show the necessary journal entries in the book of X Ltd. assuming that
Case-I : The consideration was payable 10% in cash and the balance in 54000 equity shares of Rs. 10 each.
Case-II : The consideration was payable 10% in cash and the balance in 45000 equity shares of Rs. 10 each.
Case-III : The consideration was payable 10% in cash and the balance in 60,000 equity shares of Rs. 10 each.
Answer : Solution:-
Question. 800 Shares of Rs. 10 each issued at per were forfeited for the non-payment of final call of Rs. 2 per share. These shares were reissued at Rs. 8 per share fully paid-up.
Answer : Capital Reserve Rs. 4,800.
Question. TPT Ltd. invited applications for issuing 1,00,000 equity shares of Rs. 10 each at a premium of Rs. 3 per share. The whole amount was payable on application. The issue was over subscribed by 30,000 shares and allotment was made on pro-rata basis. Pass necessary journal entries in the books of the company.
Answer : (i) Dr. Bank A/C Rs. 16,90,000, Cr.Eq.share Application A/C Rs. 16,90,000.
(ii) Dr.Eq.Share Application A/C Rs. 16,90,000, Cr.Eq. share Capital A/C Rs.10,00,000, Cr. Security premium A/C Rs. 300,000, Cr. Bank A/C Rs. 3,90,000.
Question. A company forfeited 240 shares of Rs. 10 each issued to raj at a a premium of 20%. Raman had applied for 300 shares and had not paid anything after paying Rs 6 per share including premium on application. 180 shares were reissued at Rs. 11 per share fully paid up. Pass journal entries relating to forfeiture and reissue of shares.
Answer : Capital Reserve Rs. 990.
Question. Pass journal entries for the following at the time of issue of debentures:
(a) B Ltd. issues 30,000, 12% Debentures of Rs. 100 each at a discount of 5 % to be repaid at par at the end of 5 years.
(b) E Ltd. issues Rs. 60,000, 12% Debentures of Rs. 100 each at a discount of 5 % repayable at a premium of 10% at the end of 5 years.
(c) F Ltd. issues Rs. 70,000, 12% Debentures of Rs. 100 each at a premium of 5 % redeemable at 110%.
Answer :
Question. On 1st July 2007. A Ltd gave notice of their intention to redeem their outstanding Rs. 400,000 8% Debentures on 1st January, 2008 @ rs. 102 each and offered the holders the following options-
(a) To subscibe for (i) 6% cumulative preference shares of Rs. 20 each at Rs. 22.50 per share, accepted by debenture holders of Rs. 1,71,000 or (ii) 12% debentures were issued @96% accepted by the holders of Rs. 1,44,000 Debentures.
(b) Remaining debentures to be redeemed for cash if neither of the option under (a) was accepted. Pass necessary journal entries.
Answer : Hints-
(1) Case a (i) – No. of preference shares issued 7752.
(2) Case a (ii)- No. of debentures issued 1530.
(3) Remaining 85000 debentures paid in cash.
Question. On 01-04-1999, A Ltd., issued 2000, 7% debentures of Rs. 100 each at a discount of 10% redeemable at par after 4 years by converting them into equity shares of Rs. 100 each issued at a premium of 25%.
Pass journal entries in the following cases:
(i) If debentures are redeemed on maturity.
(ii) If debentures are redeemed before maturity.
Answer : Case (i) – No. of Equity shares to be issued 1,600.
Case (ii) – No. of Equity shares to be issued 1,440.
Question. X Ltd. issued 20,000 shares of Rs. 10 each at a premium of 10% payable as follows:-
On application Rs. 2 ( 1st Jan 2001), on allotment Rs. 4 (including premium) (1st April 2001), On first call Rs. 3 (1st June 2001), on second call & final call Rs. 2 (1st Aug. 2001).
Application were received for 18,000 shares and the directors made allotment in full. One shareholder to whom 40 shares were allotted paid the entire balance on his share holdings with allotment money and another shareholder did not pay allotment and 1st call money on his 60 shares but which he paidwith final call.
Calculate the amount of interest paid and received on calls-in-advance and calls-in-arrears respectively on 1st Aug. 2001.
Answer : Interest on Calls in advance Rs. 2.80
Interest on Calls in arrears Rs. 5.50
Question. Sonu Ltd. company issued 15,000 shares of Rs. 10 each. Payment on there shares is to be made as follows:
On application Rs. 4 ( 1st Feb, 2003)
On allotment Rs. 3 (1st April, 2003)
On final call Rs. 3 (1st May, 2003)
Rakesh to whom 1000 shares were allotted paid the full amount on application and mohan to whom 200 shares were allotted paid the final call money on allotment. Interest @ 6% was paid on 1st May, 2003. Pass necessary journal entries.
Answer : Interest on Calls in advance = 15 + 3 = Rs. 18
Question. X ltd. was formed with a capital of Rs. 500,000 divided into shares of Rs. 10 each out of these 2000 shares were issued to the vendors as fully paid as purchase consideration for a building acquired, 1000 shares were issued to signatories to the memorandum of association as fully paid. The directors offered 6500 shares to the public and called up Rs. 6 per and received the entry called up amount on share allotted. Show these transaction in the Balance sheet of a company.
Answer : Issued Capital Rs. 95000.
Question. The following balance appeared in the books of Z Ltd. on January 1, 2004.
12% Debentures A/C Rs. 1,50,000
Debenture Redemption Fund Rs. 1,25,000
Debenture Redemption Fund Investment Rs. 1,25,000
(Represented by Rs. 1,47,500, 3% Govt. Securities)
The annual installment added to the fund is Rs. 20,575. On December 31, 2004, the bank balance after the receipt of interest on investment was Rs. 39,100. On that date all the investment were sold at 83% and the debentures were duly redeemed. Show the necessary ledger accounts for the year 2004.
Answer : Hint : (i) Loss on sale of investment Rs. 2575.
(ii) Amount transferred to General Reserve Rs. 1,47,425.
Question: Madhur Ltd took over the assets of Rs.3,90,000 and Liabilities of Rs. 40,000 of Ruchi Ltd for a consideration of Rs. 4,00,000. 20% was paid by a cheque and the balance by issue of fully paid equity shares of Rs. 100 each at a premium of 60%. Show necessary journal entries for these transactions in the books of Madhur Ltd.
Answer: Goodwill Rs. 50,000 Number of shares issued 2,000.
Question: On 1st April 2019. Y Ltd was registered with an authorised capital of Rs. 60, 00,000 divided into 3, 00,000 equity shares of Rs. 20 each. Out of these, 50,000 shares were issued to the vendors as fully paid up for purchase of Machinery. The directors offered 1, 20,000 shares to the public and called up Rs. 10 per share and received the entire called up amount on these shares.
Show the share capital in the Balance sheet of the Company as per Schedule III and also prepare notes to accounts.
Answer: Subscribed and fully paid up capital Rs. 10,00,000;
Subscribed but not fully paid up capital Rs. 12,00,000;
Question: No: Y Ltd forfeited 400 shares of Rs. 100 each, issued at a premium of Rs. 5 per share ( to be paid at the time of allotment) for non payment of first call of Rs. 20 per share. The second and final call of Rs. 20 hasnot yet been called. Out of these,100 shares were reissued on fully paid up for Rs. 110 per share. Pass journal entries.
Answer: Capital reserve Rs. 6,000
Question: Raja Ltd forfeited 400 shares of Rs.25 each (Rs. 20 called up)held by Asha, for non payment of allotment money of Rs. 10 per share(including Rs. 5 per share as premium) and first call of Rs.6 per share. Out of these 300 shares were reissued to X as Rs. 20 called up for Rs.16 per share.
Give journal entries for forfeiture and reissue of shares.
Answer: Capital reserve Rs. 1,500
Question: X Ltd invited application for issuing 1, 00,000 equity shares of Rs. 10 each. The shares were issued at a premium of 60%. The amount was payable as follows:
On Application and allotment : Rs. 6 per share(including premium Rs. 4)
On first and Final call: Balance including premium
Application for 1, 90,000 shares were received. The allotment was made as follows:
Category A: Application for 10,000 shares were rejected.
Category B: Application for 1, 00,000 shares were allotted 50,000 shares.
Category C: Application for 80,000 shares was allotted 50,000 shares.
Excess money received on application and allotment was adjusted towards sum due on first and final call.
Ali, who belonged to category B, and had applied for 1,000 shares, paid the entire amount of his share money with application.
Bali , who belonged to category C, was allotted 1,000 shares, failed to pay the first and final call money. His shares were forfeited and reissued at Rs.15 per share fully paid up.
Pass the necessary journal entries for the above transaction in the books of X Ltd.
Answer: Application money received Rs. 11,50,000
Applicaion money returned Rs. 68,000
Money received as calls in advance Rs. 4,82,000
Calls in arrear Rs. 6,400
Money received at the time of first call Rs. 5,11,600
Question: Z Ltd forfeited 700 shares of Rs. 100 each , issued at a premium of Rs. 5 per share for non payment of allotment money of Rs. 35 per share(including premium) and first call of Rs. 20 per share. The second and final call of Rs. 20 has not yet been called. 500 of these shares were reissued as Rs. 80 paid up for Rs. 92 per share. Pass journal entries.
Answer: Capital reserve Rs. 15,000
Question: New industries Ltd invited application for 1,00,000 shares of Rs. 10 each at a premium of Rs. 5 per share, payable as follows:
On application Rs. 4.50 per share; On allotment Rs. 7.50 (including premium); On 1st call Rs. 2 and on final call Rs. 1 per share.
Application were received for 1,25,000 shares and allotment was made pro rata to the applicant of 1,20,000 shares. The remaining applications being refused. Excess money received on application was adjusted towards amount due on allotment.
D , to whom 2,000 shares were allotted, failed to pay allotment money and on his failure to pay the first call, his shares were forfeited. M, the holder of 3,000 shares, failed to pay the two calls and his shares were also forfeited. All these shares were sold to R as fully paid for Rs.8 per share. Pass journal entries in the books of the Company.
Answer: cash received on allotment Rs. 6,46,800 Capital reserve Rs. 21,800.
