Company Accounts

Share Capital

Medium

Which of the following statements are correct?

(A) A company is an artificial person.

(B) Company's shares are generally transferable.

(C) Paid up capital can exceed called up capital.

(D) The part of capital which is called up only on winding up is called reserve capital.

Choose the correct answer from the options given below:

(A), (B) and (D) only.

(A), (B) and (C) only.

(A), (B), (C) and (D).

(B), (C) and (D) only.

✅ Correct Option: 1

Analysis of Each Statement

Statement (A): A company is an artificial person

CORRECT

A company is a legal entity created by law with a separate legal existence from its members. It is called an "artificial person" because it is created by law (not born naturally) but possesses legal rights similar to a natural person - it can own property, enter contracts, sue and be sued in its own name.

Statement (B): Company's shares are generally transferable

CORRECT

Free transferability of shares is a fundamental characteristic of a company, especially public companies. Shareholders can transfer their shares to others subject to provisions in the Articles of Association. This provides liquidity to shareholders and is a key advantage of the company form of organization.

Statement (C): Paid up capital can exceed called up capital

INCORRECT

Understanding the capital hierarchy:

Called up Capital = Amount demanded/called by the company from shareholders
Paid up Capital = Amount actually paid by shareholders out of called up capital

The relationship is: Paid up Capital $≤$ Called up Capital

Paid up capital can never exceed called up capital because shareholders can only pay what has been demanded by the company. If the company calls ₹8 per share, a shareholder cannot pay more than ₹8 per share.

Statement (D): The part of capital which is called up only on winding up is called reserve capital

CORRECT

Reserve capital is that portion of uncalled capital which a company, by special resolution, decides shall be called up only at the time of winding up of the company. This provides additional security to creditors as it ensures funds will be available during liquidation.

Correct statements: (A), (B) and (D) only

Answer: Option 1

2026: 13 May Shift 1

Varun Ltd. forfeited 40,000 equity shares of Rs. 100 each for non-payment of first and final call of Rs. 40 per share. The maximum amount of discount per share at which these shares can be re-issued will be :-

2025: 4 June Shift 2

Which of the following is not a feature of a company?

2026: 11 May Shift 2

A private company is one which by its articles of association:

A. Limits the number of its members to 200 (excluding its employees);

B. Limits the number of its members to 200 (including its employees);

C. Restricts the right to transfer its shares;

D. Must have at least 2 persons, except in case of one person company;

Choose the correct answer from the options given below:

2026: 13 May Shift 2

Consider the given statements below related to issue of shares and select the correct statements:

(A) The profit on the reissue of forfeited shares is not transferred to the General Reserve.

(B) Paid up capital is that portion of the called up capital which has actually been received from the shareholders.

(D) Calls in Arrears are shown on the Assets side of the balance sheet.

Choose a pair of correct statements from the given options below.

2026: 12 May Shift 1

The Articles of Association of a company may empower the directors to charge interest at a stipulated rate on calls in arrears. If the articles are silent in this regard, the rule contained in Table F shall be applicable which states that the interest at a rate not exceeding ......... p.a.

2026: 19 May Shift 1

Which of the following statements are true in relation to securities premium resreve ?

(A) 'Securities Premium Account' is shown under the title 'Assets' of the company's balance sheet under the head 'Reserves and Surplus'.

(B) Securities Premium Account balance can be used to write-off preliminary expenses of the company;

(C) Securities Premium Account balance can be used to pay premium on the redemption of preference shares or debentures of the company.

(D) Securities Premium Account balance can be used to issue partly paid bonus shares to the extent not exceeding unissued share capital of the company;

Choose the correct answer from the options given below:

Solution

Analysis of Each Statement

Statement (A): A company is an artificial person

Statement (B): Company's shares are generally transferable

Statement (C): Paid up capital can exceed called up capital

Statement (D): The part of capital which is called up only on winding up is called reserve capital

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