Assertion and reason based MCQ for Accounts Chapter 9 Accounting for Share Capital

Directions: In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

(i) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(ii) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(iii) Assertion (A) is true, but Reason (R) is false.
(iv) Assertion (A) is false, but Reason (R) is true.

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1. Assertion (A): Received amount of securities premium will not debited to securities premium reserve account, on forfeiture of shares.
Reason (R): Received amount of securities premium will be debited while writing off of certain type of capital loss or expenditure.


2. Assertion (A) Equity shares does not carry fixed rate of dividend and they are the ultimate risk bearer.
Reason (R) Equity shareholders are getting dividend from residual part of profits and in the case of windup of the company, invested money will be refunded at the last.


3. Assertion (A) Cumulative preference share capital is the share capital in which unpaid amount of dividend to be paid in the next year along with unpaid amount of dividend of previous year.
Reason (R) Participative preference share capital holders have right to participate in the decision making activities relating to their interest.


4. Assertion (A): A company must receive minimum subscription on public issue of shares.
Reason (R): In default to receive minimum subscription, company could not allot its shares.


5. Assertion (A): The equity shareholders are paid divided on the shares held by them.

Reason (R): As the equity shareholders are the owners and divided form their earning


6. Assertion (A): Preference shareholders are given a fixed rate of divided even if the company earns no profit.

Reason (R): The preference shares have preferential right of dividend to be paid as fixed amount or an amount calculated at a fixed rate, which may either be free of or subject to income tax.


7. Assertion (A): Authorised share capital is not issued to the public at once.

Reason (R): Companies do not exhaust their authorised capital in the beginning but only a part of the authorised capital is issued for public subscription. Rest of the authorised capital is raised by the company in a passed manner depending on the need for funds.


8. Assertion (A): The securities premium amount received by the company will be shown in the balance sheet directly.

Reason (R): Securities premium account is the capital receipt.


9. Assertion (A): Star Ltd. Gave shares worth 1,50,000 to the vendor from whim they bought a machinery.

Reason (R): The company can issue shares as against the payment to the vendors.


10. Assertion (A): Krishna Ltd. Invited applications for issuing 20,00,000 equity shares of Rs. 10 each. The public applied for 17,10,000 shares. The company cannot proceed for the allotment of shares.

Reason (R): The application can only be processed if the company receives a minimum of 12.5% subscription.