Q.1 Which document is known as the 'charter' of a company?
Articles of Association
Memorandum of Association
Prospectus
Share Certificate
Explanation - The Memorandum of Association contains the fundamental conditions upon which the company is incorporated and is often called the company's charter.
Correct answer is: Memorandum of Association
Q.2 Which of the following is NOT a type of share capital?
Authorized Capital
Issued Capital
Debenture Capital
Subscribed Capital
Explanation - Debenture capital is not a type of share capital; it represents borrowed funds, not ownership.
Correct answer is: Debenture Capital
Q.3 Preference shareholders have a right to receive:
Higher dividends than equity
Fixed dividends before equity shareholders
Bonus shares always
Voting rights always
Explanation - Preference shareholders are entitled to fixed dividends before equity shareholders are paid.
Correct answer is: Fixed dividends before equity shareholders
Q.4 The liability of members in a company limited by shares is:
Unlimited
Limited to the extent of unpaid share value
Limited to assets held
Zero
Explanation - In a company limited by shares, members are liable only to the extent of the unpaid amount on their shares.
Correct answer is: Limited to the extent of unpaid share value
Q.5 Which account is credited when shares are issued at a premium?
Share Capital Account
Securities Premium Account
Bank Account
Profit and Loss Account
Explanation - The excess over face value received on shares is credited to the Securities Premium Account.
Correct answer is: Securities Premium Account
Q.6 Debentures represent:
Owner’s funds
Loan capital
Reserves
Working capital
Explanation - Debentures are instruments acknowledging a company’s debt and represent borrowed funds.
Correct answer is: Loan capital
Q.7 Which of the following can issue shares to the public?
Private Company
Partnership Firm
Public Company
Sole Proprietorship
Explanation - Only public companies can issue shares to the general public under the Companies Act.
Correct answer is: Public Company
Q.8 When debentures are redeemed out of profits, which reserve is created?
Capital Redemption Reserve
Debenture Redemption Reserve
General Reserve
Securities Premium Reserve
Explanation - Debenture Redemption Reserve (DRR) is created when debentures are redeemed out of profits.
Correct answer is: Debenture Redemption Reserve
Q.9 Which meeting must be held once every year by a public company?
Statutory Meeting
Extraordinary General Meeting
Annual General Meeting
Board Meeting
Explanation - Public companies must hold an Annual General Meeting (AGM) to present financial statements and discuss company matters.
Correct answer is: Annual General Meeting
Q.10 Calls-in-arrears appear on which side of the Balance Sheet?
Assets side
Liabilities side (deducted from Share Capital)
Reserves and Surplus
Contingent Liabilities
Explanation - Calls-in-arrears reduce the paid-up share capital, so they are deducted from share capital on the liabilities side.
Correct answer is: Liabilities side (deducted from Share Capital)
Q.11 A company cannot issue shares at a discount except in the case of:
Bonus Shares
Sweat Equity Shares
Preference Shares
Forfeited Shares
Explanation - Companies Act permits issue of shares at a discount only in the case of Sweat Equity Shares issued to employees or directors.
Correct answer is: Sweat Equity Shares
Q.12 Which account is created when shares are forfeited?
Share Capital Account
Forfeited Shares Account
Securities Premium Account
Reserve Capital Account
Explanation - On forfeiture, the Share Capital Account is debited, and the Forfeited Shares Account is credited with the amount received.
Correct answer is: Forfeited Shares Account
Q.13 Which of the following is a real account?
Share Capital Account
Debenture Account
Bank Account
Reserve Account
Explanation - Bank Account represents real cash/bank balance, hence it is a real account.
Correct answer is: Bank Account
Q.14 The portion of uncalled capital which cannot be called up except at winding up is called:
Reserve Capital
Capital Reserve
Calls-in-Advance
Authorized Capital
Explanation - Reserve Capital is that part of subscribed capital which a company decides will be called up only at the time of winding up.
Correct answer is: Reserve Capital
Q.15 If a company issues shares of ₹10 at ₹12, the excess ₹2 is:
Reserve Capital
Capital Reserve
Securities Premium
Share Forfeiture
Explanation - The extra amount over face value received is credited to Securities Premium Account.
Correct answer is: Securities Premium
Q.16 Bonus shares are issued out of:
Share Capital
Reserves & Surplus
Debenture Redemption Reserve
Bank Balance
Explanation - Bonus shares are issued by capitalizing reserves and surplus of the company.
Correct answer is: Reserves & Surplus
Q.17 The minimum number of members required to form a public company is:
2
3
7
5
Explanation - Under the Companies Act, at least 7 members are required to form a public company.
Correct answer is: 7
Q.18 Which statement is prepared at the time of liquidation of a company?
Statement of Affairs
Balance Sheet
Cash Flow Statement
Trading Account
Explanation - At the time of liquidation, the liquidator prepares a Statement of Affairs showing assets and liabilities.
Correct answer is: Statement of Affairs
Q.19 Which of the following is NOT included in 'Reserves & Surplus'?
General Reserve
Capital Reserve
Securities Premium
Debentures
Explanation - Debentures are borrowed capital, not reserves or surplus.
Correct answer is: Debentures
Q.20 Right shares are issued to:
Debenture holders
Existing shareholders
Creditors
Directors
Explanation - Right shares are offered to existing shareholders in proportion to their holdings.
Correct answer is: Existing shareholders
Q.21 Which of the following expenses cannot be written off from Securities Premium Account?
Issue of Bonus Shares
Preliminary Expenses
Writing off discount on issue of shares
Dividend
Explanation - Dividends cannot be paid out of Securities Premium; it can be used only for specific purposes under law.
Correct answer is: Dividend
Q.22 When debentures are issued as collateral security, which account is credited?
Debentures Account
Debenture Suspense Account
Bank Account
Capital Reserve
Explanation - When issued as collateral, Debenture Suspense Account is credited without actual liability creation.
Correct answer is: Debenture Suspense Account
Q.23 The maximum number of members in a private company is:
50
100
200
Unlimited
Explanation - As per the Companies Act, 2013, the maximum number of members in a private company is 200.
Correct answer is: 200
Q.24 Cumulative preference shares mean:
They get voting rights every year
Unpaid dividends accumulate for future years
They get bonus shares
They are converted into equity shares
Explanation - Cumulative preference shareholders have the right to claim unpaid dividends in subsequent years.
Correct answer is: Unpaid dividends accumulate for future years
Q.25 The part of capital which a company can call up only on winding up is:
Uncalled Capital
Reserve Capital
Capital Reserve
Authorized Capital
Explanation - Reserve Capital is that part of subscribed capital which cannot be called up except at the time of winding up.
Correct answer is: Reserve Capital