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All questions of Issue Of Shares, Debentures, Underwriting And Bonus Shares for B Com Exam
What is the main advantage of issuing bonus shares from a shareholder's point of view?- a)Bonus shares provide immediate cash dividends to shareholders.
- b)Bonus shares have a fixed market price that does not fluctuate.
- c)Shareholders can convert bonus shares into cash by selling them at a higher price.
- d)Bonus shares come with reduced taxation compared to cash dividends.
Correct answer is option 'C'. Can you explain this answer?
a)
Bonus shares provide immediate cash dividends to shareholders.
b)
Bonus shares have a fixed market price that does not fluctuate.
c)
Shareholders can convert bonus shares into cash by selling them at a higher price.
d)
Bonus shares come with reduced taxation compared to cash dividends.
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Universal Academy answered |
Shareholders can choose to convert bonus shares into cash by selling them at a potentially higher market price.
Under what conditions can a company issue its shares at a discount according to the Companies Act?- a)Anytime during its operation
- b)Within the first year of commencement of business
- c)If it is a public company
- d)Only if the shareholders approve
Correct answer is option 'B'. Can you explain this answer?
a)
Anytime during its operation
b)
Within the first year of commencement of business
c)
If it is a public company
d)
Only if the shareholders approve
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Universal Academy answered |
According to Section 79 of the Companies Act, a company can issue its shares at a discount only if at least one year has elapsed from the date of commencement of business. It must also fulfill other conditions, including approval by shareholders and the court.
What is the main difference between registered debentures and bearer debentures?- a)Registered debentures are secured, while bearer debentures are not.
- b)Registered debentures are non-convertible, while bearer debentures are convertible.
- c)Registered debentures require physical delivery for transfer, while bearer debentures are transferrable by delivery.
- d)Registered debentures have a higher priority claim on assets.
Correct answer is option 'C'. Can you explain this answer?
a)
Registered debentures are secured, while bearer debentures are not.
b)
Registered debentures are non-convertible, while bearer debentures are convertible.
c)
Registered debentures require physical delivery for transfer, while bearer debentures are transferrable by delivery.
d)
Registered debentures have a higher priority claim on assets.
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Universal Academy answered |
Registered debentures are recorded in the company's register, and ownership transfer requires proper documentation. Bearer debentures, on the other hand, can be transferred by simple delivery, making them more convenient for trading.
Which type of debentures are redeemed before any other debentures?- a)Unsecured debentures
- b)First debentures
- c)Non-redeemable debentures
- d)Convertible debentures
Correct answer is option 'B'. Can you explain this answer?
a)
Unsecured debentures
b)
First debentures
c)
Non-redeemable debentures
d)
Convertible debentures
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Universal Academy answered |
First debentures are redeemed before any other debentures. They have the highest priority in redemption.
What is the term used for the demand made by a company asking shareholders to remit the remaining unpaid amount on shares allotted to them?- a)Allocation
- b)Distribution
- c)Call
- d)Collection
Correct answer is option 'C'. Can you explain this answer?
a)
Allocation
b)
Distribution
c)
Call
d)
Collection
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Universal Academy answered |
A call is a demand made by the company to its shareholders to pay the remaining unpaid amount on shares allotted to them. Calls can be made in one or more installments depending on the company's financial needs.
Which type of debentures have a claim on the assets charged with the highest priority?- a)Unsecured debentures
- b)First mortgage debentures
- c)Second mortgage debentures
- d)Convertible debentures
Correct answer is option 'B'. Can you explain this answer?
a)
Unsecured debentures
b)
First mortgage debentures
c)
Second mortgage debentures
d)
Convertible debentures
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Universal Academy answered |
First mortgage debentures have the highest priority claim on the assets charged by the company. These debenture holders will be paid back their principal and interest before any other debenture holders.
When a company issues its shares at a premium, what account is credited with the premium amount?- a)Share Capital A/c
- b)Goodwill A/c
- c)Securities Premium A/c
- d)Retained Earnings A/c
Correct answer is option 'C'. Can you explain this answer?
a)
Share Capital A/c
b)
Goodwill A/c
c)
Securities Premium A/c
d)
Retained Earnings A/c
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Universal Academy answered |
When a company issues its shares at a premium, the premium amount received is credited to the "Securities Premium A/c." This account represents the amount received over and above the face value of the shares.
What is the purpose of issuing bonus shares by a company?- a)To generate additional capital by selling shares to new investors.
- b)To distribute profits to existing shareholders in the form of shares.
- c)To replace forfeited shares with new shares.
- d)To increase the company's authorized capital.
Correct answer is option 'B'. Can you explain this answer?
a)
To generate additional capital by selling shares to new investors.
b)
To distribute profits to existing shareholders in the form of shares.
c)
To replace forfeited shares with new shares.
d)
To increase the company's authorized capital.
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Universal Academy answered |
Bonus shares are issued to distribute profits to existing shareholders in the form of additional shares rather than cash dividends.
In the context of reissuing forfeited shares originally issued at a discount, how is the original amount of discount treated?- a)It is debited from the Share Forfeited Account when reissuing the shares.
- b)It is credited to the Securities Premium Account when reissuing the shares.
- c)It is transferred to the Capital Reserve Account after reissuing the shares.
- d)It remains unaffected during the reissue process.
Correct answer is option 'D'. Can you explain this answer?
a)
It is debited from the Share Forfeited Account when reissuing the shares.
b)
It is credited to the Securities Premium Account when reissuing the shares.
c)
It is transferred to the Capital Reserve Account after reissuing the shares.
d)
It remains unaffected during the reissue process.
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Universal Academy answered |
The original amount of discount remains unaffected during the reissuing process of forfeited shares originally issued at a discount.
What are the conditions that must be satisfied for a bonus issue according to the Companies Act, 1956?- a)The Articles of Association should permit bonus issue, and the company should have sufficient undistributed profits.
- b)The company should increase its authorized capital, and the bonus issue proposal should be approved by the Controller of Capital Issues.
- c)The company should have a provision for revaluation reserves, and the bonus issue should replace dividend payments.
- d)The company should have issued fully convertible debentures, and the bonus issue should be made within 3 months of approval.
Correct answer is option 'A'. Can you explain this answer?
a)
The Articles of Association should permit bonus issue, and the company should have sufficient undistributed profits.
b)
The company should increase its authorized capital, and the bonus issue proposal should be approved by the Controller of Capital Issues.
c)
The company should have a provision for revaluation reserves, and the bonus issue should replace dividend payments.
d)
The company should have issued fully convertible debentures, and the bonus issue should be made within 3 months of approval.
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Universal Academy answered |
The Articles of Association must allow bonus issues, and the company should have undistributed profits to make a bonus issue.
What is the maximum permissible residual reserve after a bonus issue according to the guidelines?- a)30% of the increased paid-up capital.
- b)40% of the increased paid-up capital.
- c)Equal to the amount of bonus shares issued.
- d)20% of the increased paid-up capital.
Correct answer is option 'B'. Can you explain this answer?
a)
30% of the increased paid-up capital.
b)
40% of the increased paid-up capital.
c)
Equal to the amount of bonus shares issued.
d)
20% of the increased paid-up capital.
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Universal Academy answered |
The maximum permissible residual reserve after a bonus issue should be at least 40% of the increased paid-up capital.
What is the term used for the amount paid by applicants for shares along with their application?- a)Allotment Money
- b)Call Money
- c)Subscription Money
- d)Application Money
Correct answer is option 'D'. Can you explain this answer?
a)
Allotment Money
b)
Call Money
c)
Subscription Money
d)
Application Money
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Universal Academy answered |
Application money is the amount paid by applicants for shares along with their application. It is typically a portion of the total share price and is submitted by applicants to express their interest in acquiring shares.
What is the term used when shares are issued to the promoters of a company in lieu of the services provided by them during the incorporation of the company?- a)Initial Issue Shares
- b)Founder Shares
- c)Promotional Shares
- d)Preferred Shares
Correct answer is option 'C'. Can you explain this answer?
a)
Initial Issue Shares
b)
Founder Shares
c)
Promotional Shares
d)
Preferred Shares
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Universal Academy answered |
Promotional shares are issued to the promoters of a company as a form of consideration for the services they provide during the incorporation process. These shares are issued at a certain price, and the amount collected from these shares is typically debited to the "Goodwill A/c."
What is the purpose of the 'Reissue of Shares' process?- a)To replace forfeited shares with new shares at the same price.
- b)To distribute profits to existing shareholders in the form of bonus shares.
- c)To convert partly paid shares into fully paid shares.
- d)To issue new shares to new investors and generate additional capital.
Correct answer is option 'A'. Can you explain this answer?
a)
To replace forfeited shares with new shares at the same price.
b)
To distribute profits to existing shareholders in the form of bonus shares.
c)
To convert partly paid shares into fully paid shares.
d)
To issue new shares to new investors and generate additional capital.
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Universal Academy answered |
The reissue of shares involves selling forfeited shares to new purchasers after they have been forfeited from previous shareholders.
Under what circumstance are debentures issued at a discount?- a)When the company wants to raise funds quickly.
- b)When debentures are convertible into shares.
- c)When the company's financial position is strong.
- d)When debentures are issued for consideration other than cash.
Correct answer is option 'D'. Can you explain this answer?
a)
When the company wants to raise funds quickly.
b)
When debentures are convertible into shares.
c)
When the company's financial position is strong.
d)
When debentures are issued for consideration other than cash.
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Universal Academy answered |
Debentures are issued at a discount when they are issued at a value lower than their nominal value, often as a part of the consideration for purchasing assets.
What is the main objective of pro-rata allotment of shares?- a)To favor certain applicants over others
- b)To distribute shares proportionately among applicants
- c)To maximize the company's profits
- d)To reject certain applicants' applications
Correct answer is option 'B'. Can you explain this answer?
a)
To favor certain applicants over others
b)
To distribute shares proportionately among applicants
c)
To maximize the company's profits
d)
To reject certain applicants' applications
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Universal Academy answered |
The main objective of pro-rata allotment is to treat all applicants equally by distributing shares proportionately among them. This approach ensures fairness and equal treatment for all applicants.
Under what circumstances can a company issue fully-paid bonus shares using the premium amount collected?- a)To reward shareholders for being early investors
- b)To increase its share capital
- c)To reduce its accumulated losses
- d)To finance a new project
Correct answer is option 'C'. Can you explain this answer?
a)
To reward shareholders for being early investors
b)
To increase its share capital
c)
To reduce its accumulated losses
d)
To finance a new project
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Universal Academy answered |
According to Section 78 of the Companies Act, a company can utilize the premium amount to write off preliminary expenses, discount on issue of shares, underwriting commission, expenses on issue, and also to pay premium on redemption of preference shares or debentures. One of the purposes is to reduce accumulated losses.
What is a debenture?- a)A unit of ownership in a company.
- b)A unit of loan amount issued by a company.
- c)A type of equity share in a company.
- d)A unit of tradeable commodity.
Correct answer is option 'B'. Can you explain this answer?
a)
A unit of ownership in a company.
b)
A unit of loan amount issued by a company.
c)
A type of equity share in a company.
d)
A unit of tradeable commodity.
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Universal Academy answered |
A debenture is a unit of loan amount issued by a company when it intends to raise funds from the public. It represents a debt obligation that the company owes to the debenture holders.
What are convertible debentures?- a)Debentures that are secured by a charge on assets.
- b)Debentures that cannot be converted into shares.
- c)Debentures that have priority in redemption.
- d)Debentures that can be converted into shares after a certain period.
Correct answer is option 'D'. Can you explain this answer?
a)
Debentures that are secured by a charge on assets.
b)
Debentures that cannot be converted into shares.
c)
Debentures that have priority in redemption.
d)
Debentures that can be converted into shares after a certain period.
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Universal Academy answered |
Convertible debentures are those that can be converted into shares of the company after a predetermined period. The terms and conditions of conversion are usually specified at the time of issuing the debentures.
What account is debited when the company receives application money along with the application for shares?- a)Goodwill A/c
- b)Share Capital A/c
- c)Securities Premium A/c
- d)Application Money A/c
Correct answer is option 'B'. Can you explain this answer?
a)
Goodwill A/c
b)
Share Capital A/c
c)
Securities Premium A/c
d)
Application Money A/c
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Universal Academy answered |
When the company receives application money along with the application for shares, the entry is made by debiting the "Share Capital A/c." This represents the increase in the company's share capital due to the applications received.
When a company reissues forfeited shares at a premium, what journal entry is made?- a)Debit to Share Forfeited Account, credit to Securities Premium Account.
- b)Debit to Bank Account, credit to Share Capital Account.
- c)Debit to Securities Premium Account, credit to Share Forfeited Account.
- d)Debit to Share Capital Account, credit to Bank Account.
Correct answer is option 'A'. Can you explain this answer?
a)
Debit to Share Forfeited Account, credit to Securities Premium Account.
b)
Debit to Bank Account, credit to Share Capital Account.
c)
Debit to Securities Premium Account, credit to Share Forfeited Account.
d)
Debit to Share Capital Account, credit to Bank Account.
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Universal Academy answered |
Reissuing forfeited shares at a premium involves debiting the Bank Account and crediting the Securities Premium Account.
What is the maximum permissible discount allowed when reissuing forfeited shares originally issued at a premium?- a)The maximum discount is equal to the forfeited amount.
- b)The maximum discount is the amount of premium originally charged.
- c)The maximum discount is the difference between the premium and the nominal value.
- d)There is no discount allowed when reissuing forfeited shares.
Correct answer is option 'A'. Can you explain this answer?
a)
The maximum discount is equal to the forfeited amount.
b)
The maximum discount is the amount of premium originally charged.
c)
The maximum discount is the difference between the premium and the nominal value.
d)
There is no discount allowed when reissuing forfeited shares.
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Universal Academy answered |
The maximum discount allowed on reissue of forfeited shares originally issued at a premium is the amount forfeited on those shares.
What happens to the premium received on issuing debentures?- a)It is credited to the debenture holder's bank account.
- b)It is used to pay off company debts.
- c)It is credited to the Securities Premium A/c.
- d)It is distributed among the company's shareholders.
Correct answer is option 'C'. Can you explain this answer?
a)
It is credited to the debenture holder's bank account.
b)
It is used to pay off company debts.
c)
It is credited to the Securities Premium A/c.
d)
It is distributed among the company's shareholders.
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Universal Academy answered |
The premium received on issuing debentures is credited to the Securities Premium A/c as per the Companies Act, 1956. This account reflects the excess amount paid by investors over the nominal value of the debentures.
What is the term used for the difference between the issue price and face value of a share?- a)Goodwill
- b)Nominal Value
- c)Premium
- d)Par Value
Correct answer is option 'C'. Can you explain this answer?
a)
Goodwill
b)
Nominal Value
c)
Premium
d)
Par Value
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Universal Academy answered |
The premium is the difference between the issue price and the face value (par value) of a share. It can be either positive (issued at a price higher than face value) or negative (issued at a price lower than face value).
When shares are issued for consideration other than cash, which account is debited with the issue price of these shares?- a)Goodwill A/c
- b)Share Capital A/c
- c)Securities Premium A/c
- d)Debenture A/c
Correct answer is option 'A'. Can you explain this answer?
a)
Goodwill A/c
b)
Share Capital A/c
c)
Securities Premium A/c
d)
Debenture A/c
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Universal Academy answered |
When shares are issued for consideration other than cash, such as assets or services, the issue price of these shares is normally debited to the "Goodwill A/c" to account for the value received.
Under what circumstances can bonus shares be issued in lieu of dividend?- a)Bonus shares can always be issued in lieu of dividend.
- b)Bonus shares can only be issued if the company's reserve exceeds its paid-up capital.
- c)Bonus shares cannot be issued in lieu of dividend.
- d)Bonus shares can be issued if the company has defaulted in paying interest on debentures.
Correct answer is option 'C'. Can you explain this answer?
a)
Bonus shares can always be issued in lieu of dividend.
b)
Bonus shares can only be issued if the company's reserve exceeds its paid-up capital.
c)
Bonus shares cannot be issued in lieu of dividend.
d)
Bonus shares can be issued if the company has defaulted in paying interest on debentures.
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Universal Academy answered |
Bonus shares cannot be issued in lieu of dividend; they are a form of distributing profits directly to shareholders.
What is the primary purpose of underwriting in the stock market?- a)To guarantee a fixed market price for shares during an initial public offering.
- b)To ensure that all shares are sold at par value to new investors.
- c)To determine the dividend payout ratio for shareholders.
- d)To mitigate the risk associated with selling securities during an IPO.
Correct answer is option 'D'. Can you explain this answer?
a)
To guarantee a fixed market price for shares during an initial public offering.
b)
To ensure that all shares are sold at par value to new investors.
c)
To determine the dividend payout ratio for shareholders.
d)
To mitigate the risk associated with selling securities during an IPO.
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Universal Academy answered |
Underwriting in the stock market involves mitigating the risk associated with selling securities, especially during initial public offerings (IPOs).
What are non-redeemable debentures?- a)Debentures that can be converted into shares.
- b)Debentures that are not redeemed during the company's lifetime.
- c)Debentures that are secured by a charge on assets.
- d)Debentures that are issued without interest.
Correct answer is option 'B'. Can you explain this answer?
a)
Debentures that can be converted into shares.
b)
Debentures that are not redeemed during the company's lifetime.
c)
Debentures that are secured by a charge on assets.
d)
Debentures that are issued without interest.
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Universal Academy answered |
Non-redeemable debentures are those that are not redeemed during the lifetime of the company. They are repaid only when the company goes into liquidation.
What is the difference between debentures issued at par and debentures issued at premium?- a)Debentures issued at par have a higher face value.
- b)Debentures issued at premium are not secured by any assets.
- c)Debentures issued at par are issued at a value higher than their nominal value.
- d)Debentures issued at premium have an interest rate higher than others.
Correct answer is option 'C'. Can you explain this answer?
a)
Debentures issued at par have a higher face value.
b)
Debentures issued at premium are not secured by any assets.
c)
Debentures issued at par are issued at a value higher than their nominal value.
d)
Debentures issued at premium have an interest rate higher than others.
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Universal Academy answered |
Debentures issued at par are issued at their nominal value, while debentures issued at premium are issued at a value higher than their nominal value, reflecting the investor's willingness to pay more.
What is the primary purpose of issuing debentures for consideration other than cash?- a)To raise funds for business expansion.
- b)To reduce the company's tax liability.
- c)To secure priority in asset claims.
- d)To increase the company's equity share capital.
Correct answer is option 'A'. Can you explain this answer?
a)
To raise funds for business expansion.
b)
To reduce the company's tax liability.
c)
To secure priority in asset claims.
d)
To increase the company's equity share capital.
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Universal Academy answered |
Issuing debentures for consideration other than cash allows the company to acquire assets without utilizing its cash reserves, thereby facilitating business expansion.
Chapter doubts & questions for Issue Of Shares, Debentures, Underwriting And Bonus Shares - Advanced Corporate Accounting 2025 is part of B Com exam preparation. The chapters have been prepared according to the B Com exam syllabus. The Chapter doubts & questions, notes, tests & MCQs are made for B Com 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests here.
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