Deck 9: Shares, Reserves, and Dividends in Company Law

Question 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.

Answer 1

both a and b.

Question 2

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

Answer 2

capital reserve from sale of fixed assets in cash

Question 3

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 six months from the date of approval
D)bonus is simply capitalisation of free reserve

Answer 3

bonus issue is made in lieu of dividend

Question 4

Redeemable Preference shares can be redeemed out of __________

A)the sale proceeds of investments
B)the proceeds of a fresh issue of shares
C)share premium
D)the proceeds of issue of debentures

Question 5

When Redeemable Preference shares are due for redemption, the entry passed is

A)debit redeemable preference share capital a/c; credit cash a/c
B)debit redeemable preference share capital a/c; credit preference shareholders a/c
C)debit preference shareholders a/c; credit cash a/c
D)debit preference shareholders a/c; credit capital reduction a/c

Question 6

Which of the following can be utilized for the redemption of preference shares of a company out of profit:

A)shares forfeited account
B)development rebate reserve account
C)capital redemption reserve account
D)dividend equalization reserve

Question 7

Which of the following cannot be utilized for the redemption of preference shares of a company

A)securities premium on fresh issue of shares
B)general reserve
C)profit and loss account
D)dividend equalization reserve

Question 8

Which of the following cannot be used for the purpose of creation of capital redemption reserve account?

A)profit and loss account (credit balance)
B)general reserve account
C)dividend equalization reserve account
D)unclaimed dividends account

Question 9

The Capital Redemption reserve is created for the following reasons:

A)to maintain the capital intact
B)to safeguard the interest company's creditors
C)both of the above
D)none of the above

Question 10

Which of the following accounts can be transferred to capital redemption reserve account?

A)general reserve account
B)forfeited shares account
C)profit prior to incorporation
D)securities premium account

Question 11

According to sec. 100(1)(c) of the companies act, a company can pay back share capital which is in excess of need if:

A)authorized by articles
B)confirmation of the court
C)special resolution is passed to that effect
D)all of the above

Question 12

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

Question 13

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

Question 14

When bonus share are received the average cost of the existing shares are ______

A)reduced
B)increased
C)equal
D)none of these

Question 15

Bonus shares are issued by ________ free reserves

A)generalizing
B)capitalizing
C)equalizing
D)none of these

Question 16

Bonus shares are issued out of _________

A)capital reserve
B)free reserve
C)share premium
D)none of these

Question 17

Right shares are issued to _________ shareholders

A)previous
B)existing
C)future
D)none of these

Question 18

Forfeiture of shares results in compulsory termination of ______ due to non-payment of allotment/call money

A)allotment
B)membership
C)subscription
D)issue

Question 19

Securities premium account can be used for

A)paying tax liability
B)paying dividend on shares
C)allowing discount in reissue of forfeited shares
D)to write off preliminary expenses

Question 20

After the issue of forfeited shares, balance of forfeited shares account Is transferred to

A)capital reserves a/c
B)share capital
C)general reserves
D)profit & loss a/c

Question 21

Preference shares have priority over equity shares for

A)payment of dividend and repayment of capital
B)voting in annual general meeting
C)subscribe for new issue of shares and debentures
D)interest on money invested in company

Question 22

Shareholders get:

A)interest
B)dividend
C)bonus
D)commission

Question 23

Debenture holders have right to receive _______ even if there is no profit

A)interest
B)commission
C)dividend
D)bonus

Question 24

Debenture holders are the _____ of the company

A)owners
B)customers
C)creditors
D)partners

Question 25

Dividends are usually paid as a percentage of

A)authorized capital
B)net profit
C)paid up capital
D)called up capital