Company Accounts

Share Capital

Medium

common

Which statements are correct about capital reserve:-

(A) It is necessary to create capital reserves out of capital profits, if any.

(B) It cannot be used to issue bonus shares.

(C) It can be used to write off capital losses or to issue bonus shares any time during the lifetime of the company.

(D) It is not shown on the company balance sheet.

Choose the correct answer from the options given below:

(A) and (C) only

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

(A), (C) and (D) only

✅ Correct Option: 1

Capital Reserve is a reserve created out of capital profits and has specific characteristics and uses. Let me examine each statement:

Statement (A): When a company earns capital profits (such as profit on reissue of forfeited shares, profit prior to incorporation, or premium on issue of shares/debentures), these must be transferred to Capital Reserve as they cannot be distributed as dividends. This makes the statement correct.

Statement (B): Capital Reserve can be used to issue fully paid bonus shares to shareholders. This is one of the permissible uses of capital reserve. Therefore, this statement is incorrect.

Statement (C): Capital Reserve can be utilized for:

Writing off capital losses (like preliminary expenses, discount on issue of shares/debentures)
Issuing fully paid bonus shares

These uses are permitted during the company's lifetime, making this statement correct.

Statement (D): Capital Reserve is shown on the Balance Sheet under "Reserves and Surplus" on the Equity and Liabilities side. It is very much a part of the financial statements. This statement is incorrect.

Only statements (A) and (C) are correct.

Correct Answer: Option 1

2026: 13 May Shift 1

Which of the following given statements are true ?

(A) Share Capital is not shown under Equity & Liabilities in the Balance Sheet.

(B) Forfeited shares cannot be re-issued at a discount.

(D) Capital reserve account has a credit balance.

Choose the correct answer from the options given below:

2025: 24 May Shift 1

Arrange the following in the correct sequence:

(A) Called-up capital

(B) Subscribed capital

(D) Paid-up capital

Choose the correct answer from the options given below:

2025: 14 May Shift 2

Correct steps in the procedure of issue of shares are-

(A) Allotment of Shares

(B) Calls in Arrears

(D) Receipt of Applications

Choose the correct answer from the options given below:

2025: 22 May Shift 1

Which of the following will be credited for the excess amount received along with allotment money from the shareholders?

2025: 30 May Shift 1

Which of the following is the correct statement in respect of Forfeited Shares :-

2026: 29 May Shift 1

Who has given the following definition of a company?

"A company is a person, artificial, invisible, intangible and existing only in the eyes of law. Being a mere creation of law, it possesses only those properties which the charter of its creation confers upon it, either expressly or as incidental to its very existence".

Solution

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