Class 12 Accounting for Share Capital Mock Test (CBSE)

Topics in Accounting for Share Capital

• Features of a company
• Kinds of companies
• Share and share capital
• Categories of share capital
• Nature and classes of shares
• Issue of shares
• Accounting treatment of share issue
• Over subscription and under subscription
• Issue of shares at par and at premium
• Issue of shares for consideration other than cash
• Forfeiture of shares
• Re-issue of forfeited shares

Accounting for Share Capital practice questions with answers

1. Q1Multiple choice·1 mark
   When shares are issued at a price higher than their face value, the amount representing the excess is credited to:

   1. (a)Capital Reserve Account
   2. (b)Securities Premium Account
   3. (c)Share Capital Account
   4. (d)Statement of Profit and Loss
   Show answer and step marks

   1. Correct option: (b) Securities Premium Account+1

   Answer: (b)
2. Q2Multiple choice·1 mark
   Which of the following statements is correct regarding preference shares?

   1. (a)They do not receive any dividend even if profits are available.
   2. (b)They have a preferential right as to payment of dividend and repayment of capital.
   3. (c)They are mandatory for every company to issue along with equity shares.
   4. (d)They carry voting rights in all circumstances.
   Show answer and step marks

   1. Correct option: (b) They have a preferential right as to payment of dividend and repayment of capital.+1

   Answer: (b)
3. Q3Short answer·2 marks
   Beta Ltd. purchased machinery for $\text{Rs } 50,000$ from Machines India Ltd. and issued equity shares of $\text{Rs } 10$ each at par in full satisfaction of the purchase consideration. Pass the necessary journal entries in the books of Beta Ltd.
   Show answer and step marks

   1. Machinery A/c Dr. $\text{Rs } 50,000$ \ To Machines India Ltd. $\text{Rs } 50,000$ \ (Being machinery purchased from vendor)+1
   2. Machines India Ltd. Dr. $\text{Rs } 50,000$ \ To Equity Share Capital A/c $\text{Rs } 50,000$ \ (Being 5,000 equity shares issued at par in consideration for machinery)+1

   Answer: (1) Machinery A/c Dr. ₹50,000; To Machines India Ltd. ₹50,000 (machinery purchased). (2) Machines India Ltd. Dr. ₹50,000; To Equity Share Capital A/c ₹50,000 (5,000 equity shares of ₹10 each issued at par).
4. Q4Short answer·2 marks
   Beta Ltd. issued $5,000$ equity shares of $\text{₹}100$ each at par, payable as $\text{₹}30$ on application and $\text{₹}70$ on allotment. All money was duly received. Pass the necessary journal entries for the receipt of application money and its transfer to Share Capital account.
   Show answer and step marks

   1. Bank A/c ... Dr. $\text{₹}1,50,000$ To Equity Share Application A/c $\text{₹}1,50,000$ (Being application money received on $5,000$ shares @ $\text{₹}30$ per share)+1
   2. Equity Share Application A/c ... Dr. $\text{₹}1,50,000$ To Equity Share Capital A/c $\text{₹}1,50,000$ (Being application money transferred to Share Capital account)+1

   Answer: (1) Bank A/c Dr. ₹1,50,000; To Equity Share Application A/c ₹1,50,000 (application money on 5,000 shares @ ₹30). (2) Equity Share Application A/c Dr. ₹1,50,000; To Equity Share Capital A/c ₹1,50,000 (application money transferred to Share Capital).
5. Q5Short answer·3 marks
   Delta Ltd. issued 10,000 equity shares of $\text{Rs } 50$ each at a premium of $20\%$, payable as $\text{Rs } 15$ on application, $\text{Rs } 25$ on allotment (including premium), and the balance on first and final call. All shares were subscribed and money was duly received. Pass the necessary journal entries for share allotment and first and final call.
   Show answer and step marks

   1. Allotment due (including premium): Equity Share Allotment A/c Dr. ₹2,50,000; To Equity Share Capital A/c ₹1,50,000; To Securities Premium A/c ₹1,00,000 (10,000 shares × ₹25, of which ₹10 is premium).+1
   2. Receipt of allotment money: Bank A/c Dr. ₹2,50,000; To Equity Share Allotment A/c ₹2,50,000.+0.5
   3. First and final call due ($10,000 \times ₹20 = ₹2,00,000$, since issue price ₹60 − ₹15 − ₹25 = ₹20): Equity Share First and Final Call A/c Dr. ₹2,00,000; To Equity Share Capital A/c ₹2,00,000.+1
   4. Receipt of call money: Bank A/c Dr. ₹2,00,000; To Equity Share First and Final Call A/c ₹2,00,000.+0.5

   Answer: (1) Equity Share Allotment A/c Dr. ₹2,50,000; To Equity Share Capital A/c ₹1,50,000; To Securities Premium A/c ₹1,00,000. (2) Bank A/c Dr. ₹2,50,000; To Equity Share Allotment A/c ₹2,50,000. (3) Equity Share First and Final Call A/c Dr. ₹2,00,000; To Equity Share Capital A/c ₹2,00,000. (4) Bank A/c Dr. ₹2,00,000; To Equity Share First and Final Call A/c ₹2,00,000.
6. Q6Short answer·3 marks
   Gamma Ltd. invited applications for 20,000 equity shares of $\text{Rs } 10$ each payable at $\text{Rs } 3$ on application, $\text{Rs } 4$ on allotment, and $\text{Rs } 3$ on first and final call. Applications were received for 30,000 shares. Pro-rata allotment was made to all applicants, and excess application money was adjusted towards sums due on allotment. Pass the necessary journal entries for the application and allotment stages.
   Show answer and step marks

   1. Receipt of application money ($30,000 \times ₹3$): Bank A/c Dr. ₹90,000; To Equity Share Application A/c ₹90,000.+0.5
   2. Transfer and adjustment: Equity Share Application A/c Dr. ₹90,000; To Equity Share Capital A/c ₹60,000 ($20,000 \times ₹3$); To Equity Share Allotment A/c ₹30,000 (excess adjusted).+1
   3. Allotment due ($20,000 \times ₹4$): Equity Share Allotment A/c Dr. ₹80,000; To Equity Share Capital A/c ₹80,000.+0.5
   4. Receipt of allotment money after adjustment ($₹80,000 - ₹30,000$): Bank A/c Dr. ₹50,000; To Equity Share Allotment A/c ₹50,000.+1

   Answer: (1) Bank A/c Dr. ₹90,000; To Equity Share Application A/c ₹90,000. (2) Equity Share Application A/c Dr. ₹90,000; To Equity Share Capital A/c ₹60,000; To Equity Share Allotment A/c ₹30,000. (3) Equity Share Allotment A/c Dr. ₹80,000; To Equity Share Capital A/c ₹80,000. (4) Bank A/c Dr. ₹50,000; To Equity Share Allotment A/c ₹50,000.

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