Company Accounts
112 Practice MCQs available for CA Foundation
Paper
Paper 1: Accounting
Exam Weightage
15-20%
Key Topics
Admission, Retirement, Death, Shares, Debentures
This chapter covers Admission, Retirement, Death, Shares, Debentures and is part of Paper 1: Accounting in the CA Foundation exam.
Exam Strategy Tip
This topic carries 15-20% weightage. Focus on understanding core concepts rather than memorizing.
Key Terms
Ultr Vires
Beyond the powers. Acts done by a company beyond the scope of its Memorandum of Association.
Gross Profit
The profit earned from the core trading activities of a business, calculated as Net Sales minus Cost of Goods Sold (COGS). It reflects how efficiently a company uses its direct resources.
Current Ratio
A liquidity ratio that measures a company's ability to pay its short-term liabilities using its short-term assets. Formula: Current Assets ÷ Current Liabilities. The ideal ratio is 2:1.
Debentures
Long-term debt instruments issued by a company to the public for raising loan capital, carrying a fixed rate of interest (coupon rate) payable regardless of profit. Debenture holders are creditors, not owners, of the company.
Comparison Tables
All 112 Questions
4878
Reserve Capital
Subjective4879
Cumulative preference shares
Subjective4880
Minimum subscription
Subjective4881
Reserve Capital and Capital Reserve carry the same meaning.
Subjective4882
As per Table F, the Minimum rate of interest that can be charged on calls- in-Arrear and
that can be allowed on calls-in-advance are 10% p.m. and 12% p.m. respectively.
Subjective4883
Re-issue of forfeited shares is allotment of shares but not a sale. [May 2018, 2 Marks]
Subjective4884
Since company has existence independent of its members, it continues to be in existence
despite the death, insolvency or change of members.
[Nov. 2019, 2 Marks]; [MTP Jan. 2025]
Subjective4885
In the balance sheet of X Limited, preliminary expenses amounting to 5 lakhs and securities
premium account of ₹ 35 lakhs are appearing. The accountant can use the balance in
securities premium account to write off preliminary expenses. [Nov. 2020, 2 Marks]
Subjective4886
Re-issue of forfeited shares is allotment of shares but not a sale.
[Jan. 2021, 2 Marks]; [MTP Jan. 2025]
Subjective4887
A Company is not allowed to issue shares at a discount to the public in general. [July 2021,
2 Marks]
Subjective4888
A person holding preference shares of a company cannot hold equity shares of the same
company. [July 2021, 2 Marks]
Subjective4889
Non-participating preference shareholders enjoy voting rights. [Dec. 2021, 2 Marks]
Subjective4890
Fashion Garments Ltd. invited applications for issuing 10,000 Equity Shares of 10 each. The
amount was payable as follows:-
(i) On Application 1 per share
(ii) On Allotment 2 per share
(iii) On First call 3 per share
(iv) On Second and Final Call 4 per share
The issue was fully subscribed. Ram to whom 100 shares were allotted, failed to pay the
allotment money and his shares were forfeited immediately after the allotment. Shyam to
whom 150 shares were allotted, failed to pay the first call. His shares were also forfeited
after the first call. Afterwards the second and final call was made. Mohan to whom 50 shares
were allotted failed to pay the second and final call. His shares were also forfeited. All the
forfeited shares were re-issued at 9 per share fully paid-up.
Pass necessary Journal entries in the books of Fashion Garments Ltd.
[Dec. 2021, 15 Marks]; [RTP Jan. 2025; Modified-Figures-3X]
Subjective4891
A Limited issued 20,000 Equity shares of 10 each at a premium of 10%, payable 2 on
application; 4 on allotment (including premium); ₹ 2 on first call and balance on the final
call. All the shares were fully subscribed. Mr. M who held 2000 shares paid full remaining
amount on first call itself. The final call which was made after 4 months from the first call
was fully paid except a shareholder having 200 shares and one another shareholder having
100 shares. They paid their due amount after 3 months and 4 months respectively along
with interest on calls in arrears, Company also paid interest on calls in advance to Mr. M.
The Company maintains Calls in Arrear and Calls in Advance A/c.
Give journal entries to record these transactions. Show workings of Interest calculation.
(Ignore dates).
[June 2022, 15 Marks]; [MTP Jan, 2025; Modified; Figures-10X]
Subjective4892
BP Limited issued a prospectus inviting applications for 1,20,000 equity shares of 10 each
at a premium of 2 per share payable as follows:
On Application -3 per share
On Allotment - 5 per share (including premium)
On First and Final Call - 4 per share
Applications were received for 3,60,000 equity shares. Applications for 80,000 shares were
rejected and the money refunded. Shares allotted to remaining applications as follows:
Category No. of shares Applied No. of shares Allotted
I 1,60,000 80,000
II 1,20,000 40,000
Excess money received with applications was adjusted towards sums due on Allotment and
the balance amount returned to the applicants. All calls were made duly received except the
final call by a shareholder belonging to Category I who has applied for 680 shares. His
shares were forfeited. The forfeited shares were reissued at 13 per share fully paid-up.
Pass necessary journal entries for the above transactions in the books of BP Ltd. Open call
in arrears account whenever required. [June 2023, 15 Marks]; [MTP Jan. 2025]
Subjective4893
A Ltd. issued 25,000 equity shares of ₹ 100 each at a premium of ₹ 25 per share payable as
follows:
On Application ₹ 50
On Allotment 50 including premium, and
On Final Call 25
Applications were received for 29,000 shares. Letter of regret were issued to applicants for
4,000 shares and shares were allotted to all other applicants.
Mr. A, the holder of 150 shares, failed to pay the allotment and call money, the shares were
forfeited.
Show the journal entries and cash book in the books of A Limited.
[Dec. 2023, 15 Marks]
Subjective4894
P Limited issued 6,00,000 equity shares of 10 each at a premium of 2 per share, payable as
3 on application, 5 on allotment (including premium) and the balance in two calls of equal
amount.
Applications were received for 8,00,000 shares and pro rata allotment was made to all the
applicants. The excess application money was adjusted towards allotment. Harish to whom
1600 shares were allotted failed to pay both calls and his shares were subsequently forfeited
after second call. You are required to pass journal entries in the books of P Limited and
prepare bank account. [Sept. 2024, 15 Marks]
Subjective4895
Arpit Ltd., with an authorized capital of ₹ 20,00,000 divided into Equity shares of 10 each,
on 1st June, 2023, invited applications for issuing 3,00,000 Equity shares at a premium of 5
per share. The amount was payable as follows:
On Application 2 per share
On Allotment (1st July, 2023) 7 (including premium) per share
On First call (1st Nov., 2023) 3 per share
On Final call (1st Jan., 2024) 3 per share
All the shares were applied for and allotted. Mr. Naresh who held 20,000 shares paid the
whole of the amount due on calls along with allotment money. The final call was fully paid
except a shareholder having 5,000 shares who paid his due amount on 1st March, 2024 i.e.
after 2 months along with interest on calls in arrears @ 10% p.a. Company also paid interest
@ 12% p.a. on calls in advance to Mr. Naresh on 1st Jan., 2024.
Give journal entries with narrations to record all these transactions in the books of Arpit
Ltd. [Jan. 2025, 15 Marks]
Subjective4896
Meaning of debentures
Subjective4897
Discount on debentures
Subjective4898
Issue of Debentures as Collateral Security
Subjective4899
Floating Charge [June 2023, 1 Mark]
Subjective4900
Debenture Redemption Premium Account and Discount on issue of debentures Account are
Nominal Accounts.
Subjective4901
Now Debentures can be issued at Par/Premium but not at discount.
Subjective4902
Like Shares a Company can issue debentures with voting rights.
Subjective4903
A fixed charge generally covers all the assets of the company including future one.
[Dec. 2022, 2 Marks]
Subjective4904
Perpetual debentures are payable at the time of liquidation of the company. [June 2023, 2
Marks]
Subjective4905
Company X Ltd. is incurring huge losses; the Board of Directors are of the opinion that in
case of losses, there is no need to pay interest to debenture holders. [RTP Jan. 2025]
Subjective4906
Debentures Suspense Account appears on the liability side of the Balance Sheet of a
Company. [MTP Jan. 2025]
Subjective4907
On 1st April 2023, Globex Ltd. took over assets of ₹ 9,00,000 and liabilities of 1,20,000 of
Himalayan Ltd. for the purchase consideration of 8,80,000. It paid the purchase
consideration by issuing 8% debenture of 100 each at 10% premium on same date. XY Ltd.
issued another 6000, 8% debenture of 100 at discount of 10% redeemable at premium of
5% after 5 years. According to the terms of the issue 30 is payable on application and the
balance on the allotment on debentures. It has been decided to write off the entire loss on
issue of discount in the current year itself. You are required to pass the journal entries in
the books of XY Ltd. for the financial year 2023-24. [RTP Jan. 2025]
Subjective4908
What do you mean by issue of Bonus shares?
Subjective4909
Right Issue.
Subjective4910
Advantages of Right Issue.
Subjective4911
Disadvantages of Right Issue.
Subjective4912
Revaluation reserve may be utilised for issuing fully paid bonus shares.
Subjective4913
Bonus issue means an issue of additional shares to existing shareholders by paying cash.
Subjective4914
Issuing of right shares results in increase in Earning per share.
Subjective4915
The following is the abstract of Balance Sheet of Happy Ltd. as on 31st March, 2024:
Issued and paid-up capital
90,000 Equity shares of 10 each fully paid-up
Less: Calls-in-arrear (10, 000 Equity shares of 2
each)
40,000 Equity shares of ₹ 10 each, 4 cash paid-up
Reserves and Surplus:
Capital Reserve (realized in cash)
Capital Redemption Reserves
Securities Premium
General Reserve
Profit and Loss Account
9,00,000
20,000
8,80,000
1,60,000
60,000
1,60,000
1,00,000
1,20,000
7,00,000
On 1st April, 2024, the company makes final call @ 6 each on 40,000 equity shares. The call
money is duly received by 30th April, 2024.
On 1st May, 2024, the Board of Directors of the company decided:
(i) To forfeit the share on which final call of 2 each is due;
(ii) To re-issue the forfeited share @ ₹ 11 each as fully paid up;
(iii) To issue fully paid bonus shares in the ratio of one fully paid bonus share for every
two fully paid shares held; and
(iv) To use minimum balance of Profit and Loss Account.
Pass necessary journal entries in the books of the company on the basis of the above
decisions. [June 2024, 10 Marks]
Subjective4916
Following is the extract of the Balance Sheet of Substance Ltd. as at 31st March, 2024
Authorised capital
45,000 12% Preference shares of ₹ 10 each 4,50,000
4,50,000 Equity shares of 10 each 45,00,000
Issued and Subscribed capital: 49,50,000
36,000 12% Preference shares of 10 each fully paid 3,60,000
4,05,000 Equity shares of 10 each, 8 paid up 32,40,000
Reserves and surplus:
General Reserve 5,40,000
Capital Reserve (profit realized on sale of plant) 1,80,000
Securities premium 1,12,500
Profit and Loss Account 9,00,000
On 1st April, 2024, the Company has made final call @ ₹ 2 each on 4,05,000 equity shares.
The call money was received by 20th April, 2024. Thereafter, the company decided to
capitalize its reserves by way of bonus at the rate of one share for every four shares held.
Company decides to use Capital Reserve for bonus issue as it has been realized in cash.
Show necessary journal entries in the books of the company and prepare the extract of the
Balance Sheet as on 30th April, 2024 after bonus issue. [MTP Jan. 2025]
Subjective4917
Discuss the provisions of Section 55 of the Companies Act, 2013.
Subjective4918
Explain the conditions when a company should issue new equity shares for redemption of
the preference shares. Also discuss the advantages and disadvantages of redemption of
preference shares by issue of equity shares. [CA Inter November 2018, 4 Marks]
Subjective4919
Methods of redemption of preference shares.
Subjective4920
When preference shares are redeemed out of the Profit of the company, a reserve is created
in the name of Capital redemption reserve.
Subjective4921
Capital redemption reserve is utilized for issuing of fully paid bonus shares only.
Subjective4922
A company can redeem its partly paid-up preference shares.
Subjective4923
For redemption of preference shares, proceeds from fresh issue of equity shares and
debentures can be utilized. [Jan. 2025, 2 Marks]
Subjective4924
The following balances appeared in the Books of Mac Ltd. as on 31st December, 2023:
80,000, 10% Preferences shares of 100 each, 75 paid-up 60,00,000
2,00,000 Equity share of 100 each fully paid-up 2,00,00,000
Securities Premium 6,50,000
Capital Redemption Reserve 42,00,000
General Reserve 85,00,000
Under the terms of their issue, the preference shares are redeemable on 31st March, 2024
at a premium of 5%. In order to finance the redemption, the company makes a right issue
of 60,000 equity shares of 100 each at a premium of 10%, 25 being payable on application,
₹ 45 (including premi- um) on allotment and the balance on 1st August, 2024. The issue
was fully subscribed and the allotment made on 1st March, 2024. The amount due on
allotment was duly received by 25th March, 2024.
The preference shares were redeemed after fulfilling the necessary conditions of section 55
of the Companies Act, 2013.
You are required to pass the necessary Journal Entries (including narrations) to give effect
to the above arrangement. Also prepare the Notes to accounts on Share Capital, Reserves
and Surplus relevant to the Balance Sheet im- mediately after the redemption of preference
share as on 31st March, 2024. Ignore date column in Journal. [June 2024, 15 Marks]
Subjective4925
The following is the summarized Balance Sheet of Trinity Ltd. as at 31.3.2023:
Liabilities ₹
Assets ₹
Share Capital Fixed Assets 3,00,000
Authorised Less: Dep. 1,00,000 2,00,000
10,000 10% Redeemable
Preference Shares of 10 each
1,00,000 Investments 1,00,000
90,000 Equity Shares of 10
each
9,00,000
10,00,000
Issued, Subscribed and
Paid- up Capital
Current Assets and Loans
and Advances Inventory
10,000 10% Redeemable
Preference Shares of 10 each
1,00,000 Trade receivables 25,000
10,000 Equity Shares of 10
each
1,00,000 Cash and Bank Balances 50,000
(A) 2,00,000
Reserves and Surplus
General Reserve 1,20,000
Securities Premium 70,000
Profit and Loss A/c 18,500
(B) 2,08,500
Current Liabilities and
Provisions (C)
11,500
Total (A+B+C) 4,20,000 4,20,000
For the year ended 31.3.2024, the company made a net profit of ₹ 35,000 after providing
20,000 depreciation.
The following additional information is available with regard to company's operation :
1. The preference dividend for the year ended 31.3.2024 was paid.
2. Except cash and bank balances other current assets and current liabilities as
on 31.3.2024, was the same as on 31.3.2023.
3. The company redeemed the preference shares at a premium of 10%.
4. The company issued bonus shares in the ratio of two share for every equity
share held as on 31.3.2024.
5. To meet the cash requirements of redemption, the company sold in-
vestments.
6. Investments were sold at 90% of cost on 31.3.2024.
You are required to prepare necessary journal entries to record redemption and issue of
bonus shares. [RTP Jan. 2025]
Subjective4926
The books of Rishab Ltd. showed the following balance on 31st December, 2024:
60,000 Equity Shares of ₹ 10 each fully paid; 36,000 12% Redeemable Preference Shares of
₹ 10 each fully paid; 4,000 10% Redeemable Preference Shares of 10 each, ₹ 8 paid up (all
shares issued on 1st April, 2024).
Undistributed Reserve and Surplus stood as: Profit and Loss Account 1,60,000; General
Reserve 2,40,000; Securities Premium Account 30,000 and Capital Reserve 42,000.
For redemption, 6,000 equity shares of 10 each are issued at 10% premium. At the same
time, 12% Preference shares are redeemed on 1st January, 2024 at a premium of 2 per share.
The whereabouts of the holders of 200 shares. of 10 each fully paid are not known.
A bonus issue of equity share was made at par, two shares being issued for every five held
on that date out of the Capital Redemption Reserve Account. However, equity shares, issued
for redemption are not eligible for bonus.
Show the necessary Journal Entries to record the transactions. (Ignore date column) [MTP
Jan. 2025]
Subjective4927
What are the Provisions under the Companies Act, 2013 for issue of Debentures?
Subjective4928
Methods of Redemption of Debentures
Subjective4929
A debenture issued at a discount can be redeemed at a premium.
Subjective4930
Debentures cannot be redeemed during the life time of the company.
Subjective4931
Debenture redemption reserve account is created out of its profits which are available for
distribution of dividend.
Subjective4932
XYZ Ltd. an unlisted company issued 6000, 12% debentures of ₹ 100 each at a discount of
5% on 01.04.2021. Interest is payable annually on 31st March every year. The debentures are
redeemable at premium of 10% in 3 equal annual instalments beginning from 31.03.2022.
The company invested in specified securities for the redemption of debentures. Entire loss
on issue to be booked in the 1st year. You are required to pass journal entries for all the 3
years. [Sept. 2024, 10 Marks]
Subjective4933
A company had issued 20,000, 8% partly convertible debentures of 100 each on April 1,
2023. The debentures are due for redemption on June 1, 2024. The terms of issue of
debentures provided that 30% of the debentures will be converted into equity shares
(Nominal Value 10) at a price of ₹ 20 per share and remaining will be redeemable at a
premium of 5%.
(i) Calculate the number of equity shares to be allotted to the debenture holders at
the time of conversion.
(ii) Give the necessary journal entries related to the conversion and redemption of
debentures assuming that the company has created the Debenture Redemption
Reserve and also invested required amount for redemption of debentures at the
time of issue. Debenture Redemption Reserve Investment are sold at par value.
[Jan. 2025, Marks 5]
Subjective5211
Reserve Capital
Subjective5212
Cumulative preference shares
Subjective5213
Minimum subscription
Subjective5214
Reserve Capital and Capital Reserve carry the same meaning.
Subjective5215
As per Table F, the Minimum rate of interest that can be charged on calls- in-Arrear and
that can be allowed on calls-in-advance are 10% p.m. and 12% p.m. respectively.
Subjective5216
Re-issue of forfeited shares is allotment of shares but not a sale. [May 2018, 2 Marks]
Subjective5217
Since company has existence independent of its members, it continues to be in existence
despite the death, insolvency or change of members.
[Nov. 2019, 2 Marks]; [MTP Jan. 2025]
Subjective5218
In the balance sheet of X Limited, preliminary expenses amounting to 5 lakhs and securities
premium account of ₹ 35 lakhs are appearing. The accountant can use the balance in
securities premium account to write off preliminary expenses. [Nov. 2020, 2 Marks]
Subjective5219
Re-issue of forfeited shares is allotment of shares but not a sale.
[Jan. 2021, 2 Marks]; [MTP Jan. 2025]
Subjective5220
A Company is not allowed to issue shares at a discount to the public in general. [July 2021,
2 Marks]
Subjective5221
A person holding preference shares of a company cannot hold equity shares of the same
company. [July 2021, 2 Marks]
Subjective5222
Non-participating preference shareholders enjoy voting rights. [Dec. 2021, 2 Marks]
Subjective5223
Fashion Garments Ltd. invited applications for issuing 10,000 Equity Shares of 10 each. The amount was payable as follows:
| Installment | Amount per share |
| :-------------------------- | :--------------- |
| On Application | 1 |
| On Allotment | 2 |
| On First call | 3 |
| On Second and Final Call | 4 |
The issue was fully subscribed. Ram to whom 100 shares were allotted, failed to pay the allotment money and his shares were forfeited immediately after the allotment. Shyam to whom 150 shares were allotted, failed to pay the first call. His shares were also forfeited after the first call. Afterwards the second and final call was made. Mohan to whom 50 shares were allotted failed to pay the second and final call. His shares were also forfeited. All the forfeited shares were re-issued at 9 per share fully paid-up.
Pass necessary Journal entries in the books of Fashion Garments Ltd. [Dec. 2021, 15 Marks]; [RTP Jan. 2025; Modified-Figures-3X]
SubjectiveThe issue was fully subscribed. Ram to whom 100 shares were allotted, failed to pay the allotment money and his shares were forfeited immediately after the allotment. Shyam to whom 150 shares were allotted, failed to pay the first call. His shares were also forfeited after the first call. Afterwards the second and final call was made. Mohan to whom 50 shares were allotted failed to pay the second and final call. His shares were also forfeited. All the forfeited shares were re-issued at 9 per share fully paid-up.
Pass necessary Journal entries in the books of Fashion Garments Ltd. [Dec. 2021, 15 Marks]; [RTP Jan. 2025; Modified-Figures-3X]
5224
A Limited issued 20,000 Equity shares of ₹10 each at a premium of 10%, payable 2 on application; 4 on allotment (including premium); ₹ 2 on first call and balance on the final call. All the shares were fully subscribed. Mr. M who held 2000 shares paid full remaining amount on first call itself. The final call which was made after 4 months from the first call was fully paid except a shareholder having 200 shares and one another shareholder having 100 shares. They paid their due amount after 3 months and 4 months respectively along with interest on calls in arrears, Company also paid interest on calls in advance to Mr. M. The Company maintains Calls in Arrear and Calls in Advance A/c.
Give journal entries to record these transactions. Show workings of Interest calculation. (Ignore dates).
[June 2022, 15 Marks]; [MTP Jan, 2025; Modified; Figures-10X]
SubjectiveGive journal entries to record these transactions. Show workings of Interest calculation. (Ignore dates).
[June 2022, 15 Marks]; [MTP Jan, 2025; Modified; Figures-10X]
5225
BP Limited issued a prospectus inviting applications for 1,20,000 equity shares of 10 each at a premium of 2 per share payable as follows:
| Installment | Amount per share |
| :---------------------- | :-------------------- |
| On Application | 3 |
| On Allotment | 5 (including premium) |
| On First and Final Call | 4 |
Applications were received for 3,60,000 equity shares. Applications for 80,000 shares were rejected and the money refunded. Shares allotted to remaining applications as follows: | Category | No. of shares Applied | No. of shares Allotted | | :------- | :-------------------- | :--------------------- | | I | 1,60,000 | 80,000 | | II | 1,20,000 | 40,000 |
Excess money received with applications was adjusted towards sums due on Allotment and the balance amount returned to the applicants. All calls were made duly received except the final call by a shareholder belonging to Category I who has applied for 680 shares. His shares were forfeited. The forfeited shares were reissued at 13 per share fully paid-up.
Pass necessary journal entries for the above transactions in the books of BP Ltd. Open call in arrears account whenever required. [June 2023, 15 Marks]; [MTP Jan. 2025]
SubjectiveApplications were received for 3,60,000 equity shares. Applications for 80,000 shares were rejected and the money refunded. Shares allotted to remaining applications as follows: | Category | No. of shares Applied | No. of shares Allotted | | :------- | :-------------------- | :--------------------- | | I | 1,60,000 | 80,000 | | II | 1,20,000 | 40,000 |
Excess money received with applications was adjusted towards sums due on Allotment and the balance amount returned to the applicants. All calls were made duly received except the final call by a shareholder belonging to Category I who has applied for 680 shares. His shares were forfeited. The forfeited shares were reissued at 13 per share fully paid-up.
Pass necessary journal entries for the above transactions in the books of BP Ltd. Open call in arrears account whenever required. [June 2023, 15 Marks]; [MTP Jan. 2025]
5226
A Ltd. issued 25,000 equity shares of ₹ 100 each at a premium of ₹ 25 per share payable as follows:
| Stage | Amount (₹) |
| :------------ | :--------------------- |
| On Application | 50 |
| On Allotment | 50 (including premium) |
| On Final Call | 25 |
Applications were received for 29,000 shares. Letter of regret were issued to applicants for 4,000 shares and shares were allotted to all other applicants.
Mr. A, the holder of 150 shares, failed to pay the allotment and call money, the shares were forfeited.
Show the journal entries and cash book in the books of A Limited.
[Dec. 2023, 15 Marks]
SubjectiveApplications were received for 29,000 shares. Letter of regret were issued to applicants for 4,000 shares and shares were allotted to all other applicants.
Mr. A, the holder of 150 shares, failed to pay the allotment and call money, the shares were forfeited.
Show the journal entries and cash book in the books of A Limited.
[Dec. 2023, 15 Marks]
5227
P Limited issued 6,00,000 equity shares of 10 each at a premium of 2 per share, payable as
3 on application, 5 on allotment (including premium) and the balance in two calls of equal
amount.
Applications were received for 8,00,000 shares and pro rata allotment was made to all the
applicants. The excess application money was adjusted towards allotment. Harish to whom
1600 shares were allotted failed to pay both calls and his shares were subsequently forfeited
after second call. You are required to pass journal entries in the books of P Limited and
prepare bank account. [Sept. 2024, 15 Marks]
Subjective5228
Arpit Ltd., with an authorized capital of ₹ 20,00,000 divided into Equity shares of 10 each,
on 1st June, 2023, invited applications for issuing 3,00,000 Equity shares at a premium of 5
per share. The amount was payable as follows:
On Application 2 per share
On Allotment (1st July, 2023) 7 (including premium) per share
On First call (1st Nov., 2023) 3 per share
On Final call (1st Jan., 2024) 3 per share
All the shares were applied for and allotted. Mr. Naresh who held 20,000 shares paid the
whole of the amount due on calls along with allotment money. The final call was fully paid
except a shareholder having 5,000 shares who paid his due amount on 1st March, 2024 i.e.
after 2 months along with interest on calls in arrears @ 10% p.a. Company also paid interest
@ 12% p.a. on calls in advance to Mr. Naresh on 1st Jan., 2024.
Give journal entries with narrations to record all these transactions in the books of Arpit
Ltd. [Jan. 2025, 15 Marks]
Subjective5229
Meaning of debentures
Subjective5230
Discount on debentures
Subjective5231
Issue of Debentures as Collateral Security
Subjective5232
Floating Charge [June 2023, 1 Mark]
Subjective5233
Debenture Redemption Premium Account and Discount on issue of debentures Account are
Nominal Accounts.
Subjective5234
Now Debentures can be issued at Par/Premium but not at discount.
Subjective5235
Like Shares a Company can issue debentures with voting rights.
Subjective5236
A fixed charge generally covers all the assets of the company including future one.
[Dec. 2022, 2 Marks]
Subjective5237
Perpetual debentures are payable at the time of liquidation of the company. [June 2023, 2
Marks]
Subjective5238
Company X Ltd. is incurring huge losses; the Board of Directors are of the opinion that in
case of losses, there is no need to pay interest to debenture holders. [RTP Jan. 2025]
Subjective5239
Debentures Suspense Account appears on the liability side of the Balance Sheet of a
Company. [MTP Jan. 2025]
Subjective5240
On 1st April 2023, Globex Ltd. took over assets of ₹ 9,00,000 and liabilities of 1,20,000 of
Himalayan Ltd. for the purchase consideration of 8,80,000. It paid the purchase
consideration by issuing 8% debenture of 100 each at 10% premium on same date. XY Ltd.
issued another 6000, 8% debenture of 100 at discount of 10% redeemable at premium of
5% after 5 years. According to the terms of the issue 30 is payable on application and the
balance on the allotment on debentures. It has been decided to write off the entire loss on
issue of discount in the current year itself. You are required to pass the journal entries in
the books of XY Ltd. for the financial year 2023-24. [RTP Jan. 2025]
Subjective5241
What do you mean by issue of Bonus shares?
Subjective5242
Right Issue.
Subjective5243
Advantages of Right Issue.
Subjective5244
Disadvantages of Right Issue.
Subjective5245
Revaluation reserve may be utilised for issuing fully paid bonus shares.
Subjective5246
Bonus issue means an issue of additional shares to existing shareholders by paying cash.
Subjective5247
Issuing of right shares results in increase in Earning per share.
Subjective5248
The following is the abstract of Balance Sheet of Happy Ltd. as on 31st March, 2024:
Issued and paid-up capital
90,000 Equity shares of 10 each fully paid-up
Less: Calls-in-arrear (10, 000 Equity shares of 2
each)
40,000 Equity shares of ₹ 10 each, 4 cash paid-up
Reserves and Surplus:
Capital Reserve (realized in cash)
Capital Redemption Reserves
Securities Premium
General Reserve
Profit and Loss Account
9,00,000
20,000
8,80,000
1,60,000
60,000
1,60,000
1,00,000
1,20,000
7,00,000
On 1st April, 2024, the company makes final call @ 6 each on 40,000 equity shares. The call
money is duly received by 30th April, 2024.
On 1st May, 2024, the Board of Directors of the company decided:
(i) To forfeit the share on which final call of 2 each is due;
(ii) To re-issue the forfeited share @ ₹ 11 each as fully paid up;
(iii) To issue fully paid bonus shares in the ratio of one fully paid bonus share for every
two fully paid shares held; and
(iv) To use minimum balance of Profit and Loss Account.
Pass necessary journal entries in the books of the company on the basis of the above
decisions. [June 2024, 10 Marks]
Subjective5249
Following is the extract of the Balance Sheet of Substance Ltd. as at 31st March, 2024
Authorised capital
45,000 12% Preference shares of ₹ 10 each 4,50,000
4,50,000 Equity shares of 10 each 45,00,000
Issued and Subscribed capital: 49,50,000
36,000 12% Preference shares of 10 each fully paid 3,60,000
4,05,000 Equity shares of 10 each, 8 paid up 32,40,000
Reserves and surplus:
General Reserve 5,40,000
Capital Reserve (profit realized on sale of plant) 1,80,000
Securities premium 1,12,500
Profit and Loss Account 9,00,000
On 1st April, 2024, the Company has made final call @ ₹ 2 each on 4,05,000 equity shares.
The call money was received by 20th April, 2024. Thereafter, the company decided to
capitalize its reserves by way of bonus at the rate of one share for every four shares held.
Company decides to use Capital Reserve for bonus issue as it has been realized in cash.
Show necessary journal entries in the books of the company and prepare the extract of the
Balance Sheet as on 30th April, 2024 after bonus issue. [MTP Jan. 2025]
Subjective5250
Discuss the provisions of Section 55 of the Companies Act, 2013.
Subjective5251
Explain the conditions when a company should issue new equity shares for redemption of
the preference shares. Also discuss the advantages and disadvantages of redemption of
preference shares by issue of equity shares. [CA Inter November 2018, 4 Marks]
Subjective5252
Methods of redemption of preference shares.
Subjective5253
When preference shares are redeemed out of the Profit of the company, a reserve is created
in the name of Capital redemption reserve.
Subjective5254
Capital redemption reserve is utilized for issuing of fully paid bonus shares only.
Subjective5255
A company can redeem its partly paid-up preference shares.
Subjective5256
For redemption of preference shares, proceeds from fresh issue of equity shares and
debentures can be utilized. [Jan. 2025, 2 Marks]
Subjective5257
The following balances appeared in the Books of Mac Ltd. as on 31st December, 2023:
80,000, 10% Preferences shares of 100 each, 75 paid-up 60,00,000
2,00,000 Equity share of 100 each fully paid-up 2,00,00,000
Securities Premium 6,50,000
Capital Redemption Reserve 42,00,000
General Reserve 85,00,000
Under the terms of their issue, the preference shares are redeemable on 31st March, 2024
at a premium of 5%. In order to finance the redemption, the company makes a right issue
of 60,000 equity shares of 100 each at a premium of 10%, 25 being payable on application,
₹ 45 (including premi- um) on allotment and the balance on 1st August, 2024. The issue
was fully subscribed and the allotment made on 1st March, 2024. The amount due on
allotment was duly received by 25th March, 2024.
The preference shares were redeemed after fulfilling the necessary conditions of section 55
of the Companies Act, 2013.
You are required to pass the necessary Journal Entries (including narrations) to give effect
to the above arrangement. Also prepare the Notes to accounts on Share Capital, Reserves
and Surplus relevant to the Balance Sheet im- mediately after the redemption of preference
share as on 31st March, 2024. Ignore date column in Journal. [June 2024, 15 Marks]
Subjective5258
The following is the summarized Balance Sheet of Trinity Ltd. as at 31.3.2023:
Liabilities ₹
Assets ₹
Share Capital Fixed Assets 3,00,000
Authorised Less: Dep. 1,00,000 2,00,000
10,000 10% Redeemable
Preference Shares of 10 each
1,00,000 Investments 1,00,000
90,000 Equity Shares of 10
each
9,00,000
10,00,000
Issued, Subscribed and
Paid- up Capital
Current Assets and Loans
and Advances Inventory
10,000 10% Redeemable
Preference Shares of 10 each
1,00,000 Trade receivables 25,000
10,000 Equity Shares of 10
each
1,00,000 Cash and Bank Balances 50,000
(A) 2,00,000
Reserves and Surplus
General Reserve 1,20,000
Securities Premium 70,000
Profit and Loss A/c 18,500
(B) 2,08,500
Current Liabilities and
Provisions (C)
11,500
Total (A+B+C) 4,20,000 4,20,000
For the year ended 31.3.2024, the company made a net profit of ₹ 35,000 after providing
20,000 depreciation.
The following additional information is available with regard to company's operation :
1. The preference dividend for the year ended 31.3.2024 was paid.
2. Except cash and bank balances other current assets and current liabilities as
on 31.3.2024, was the same as on 31.3.2023.
3. The company redeemed the preference shares at a premium of 10%.
4. The company issued bonus shares in the ratio of two share for every equity
share held as on 31.3.2024.
5. To meet the cash requirements of redemption, the company sold in-
vestments.
6. Investments were sold at 90% of cost on 31.3.2024.
You are required to prepare necessary journal entries to record redemption and issue of
bonus shares. [RTP Jan. 2025]
Subjective5259
The books of Rishab Ltd. showed the following balance on 31st December, 2024:
60,000 Equity Shares of ₹ 10 each fully paid; 36,000 12% Redeemable Preference Shares of
₹ 10 each fully paid; 4,000 10% Redeemable Preference Shares of 10 each, ₹ 8 paid up (all
shares issued on 1st April, 2024).
Undistributed Reserve and Surplus stood as: Profit and Loss Account 1,60,000; General
Reserve 2,40,000; Securities Premium Account 30,000 and Capital Reserve 42,000.
For redemption, 6,000 equity shares of 10 each are issued at 10% premium. At the same
time, 12% Preference shares are redeemed on 1st January, 2024 at a premium of 2 per share.
The whereabouts of the holders of 200 shares. of 10 each fully paid are not known.
A bonus issue of equity share was made at par, two shares being issued for every five held
on that date out of the Capital Redemption Reserve Account. However, equity shares, issued
for redemption are not eligible for bonus.
Show the necessary Journal Entries to record the transactions. (Ignore date column) [MTP
Jan. 2025]
Subjective5260
What are the Provisions under the Companies Act, 2013 for issue of Debentures?
Subjective5261
Methods of Redemption of Debentures
Subjective5262
A debenture issued at a discount can be redeemed at a premium.
Subjective5263
Debentures cannot be redeemed during the life time of the company.
Subjective5264
Debenture redemption reserve account is created out of its profits which are available for
distribution of dividend.
Subjective5265
XYZ Ltd. an unlisted company issued 6000, 12% debentures of ₹ 100 each at a discount of
5% on 01.04.2021. Interest is payable annually on 31st March every year. The debentures are
redeemable at premium of 10% in 3 equal annual instalments beginning from 31.03.2022.
The company invested in specified securities for the redemption of debentures. Entire loss
on issue to be booked in the 1st year. You are required to pass journal entries for all the 3
years. [Sept. 2024, 10 Marks]
Subjective5266
A company had issued 20,000, 8% partly convertible debentures of 100 each on April 1,
2023. The debentures are due for redemption on June 1, 2024. The terms of issue of
debentures provided that 30% of the debentures will be converted into equity shares
(Nominal Value 10) at a price of ₹ 20 per share and remaining will be redeemable at a
premium of 5%.
(i) Calculate the number of equity shares to be allotted to the debenture holders at
the time of conversion.
(ii) Give the necessary journal entries related to the conversion and redemption of
debentures assuming that the company has created the Debenture Redemption
Reserve and also invested required amount for redemption of debentures at the
time of issue. Debenture Redemption Reserve Investment are sold at par value.
[Jan. 2025, Marks 5]
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