Question

MK Ltd. was registered with an authorised capital of ₹ 9,00,000 divided into ₹ 90,000 equity shares of ₹ 10 each. The company offered to the public for subscription 80,000 equity shares. Applications were received for 78,000 equity shares, and shares were allotted to all the applicants. All money due was received, with the exception of the first and final call money of ₹ 3 per share on 1,000 shares allotted to Manisha. Her shares were forfeited.

Answer the following questions:

1. The amount of ‘Calls in Arrears’ disclosed in ‘Notes to Accounts’ will be ______.
   1. Nil
   2. ₹ 2,34,000
   3. ₹ 7,000
   4. ₹ 3,000
2. The number of shares of MK Ltd. after forfeiture will be ______.
   1. ₹ 78,000
   2. ₹ 89,000
   3. ₹ 79,000
   4. ₹ 77,000
3. In the ‘Notes to Accounts’, the amount disclosed under ‘Share Forfeiture Account’ will be ______.
   1. Nil
   2. ₹ 7,000
   3. ₹ 3,000
   4. ₹ 10,000
4. In the ‘Notes to Accounts’, the amount disclosed under ‘Issued Capital’ will be ______.
   1. ₹ 9,00,000
   2. ₹ 7,80,000
   3. ₹ 8,00,000
   4. ₹ 7,70,000
5. Balance in ‘Share Forfeiture Account’ will be shown in ‘Notes to Accounts’ in the Balance Sheet of MK Ltd. under ______.
   1. Will not be shown in ‘Notes to Accounts’
   2. Issued capital
   3. Authorised capital
   4. Subscribed capital
6. The amount of ‘Share Capital’ disclosed in the Balance Sheet of MK Ltd. will be ______.
   1. ₹ 7,80,000
   2. ₹ 7,73,000
   3. ₹ 7,77,000
   4. ₹ 7,87,000

Answer 1

i. The amount of ‘Calls in Arrears’ disclosed in ‘Notes to Accounts’ will be nil.

Explanation:

Calls in arrears refer to the amount not received on called-up shares that have not been forfeited by the company. In the given case, the shares are forfeited; therefore, no calls in arrears exist.

ii. The number of shares of MK Ltd. after forfeiture will be ₹ 77,000.

Explanation:

Shares applied for and allotted = ₹ 78,000

shares forfeited = ₹ 1,000

Number of shares after forfeited = ₹ 78,000 – ₹ 1,000

= ₹ 77,000

iii. In the ‘Notes to Accounts’, the amount disclosed under ‘Share Forfeiture Account’ will be ₹ 7,000.

Explanation:

Number of shares forfeited = 1,000

Amount paid Manisha per share = ₹ 10 – ₹ 3

= ₹ 7

Total Amount in Share Forfeiture Account = 1000 × 7

= ₹ 7,000

iv. In the ‘Notes to Accounts’, the amount disclosed under ‘Issued Capital’ will be ₹ 8,00,000.

Explanation:

Issued capital is part of the Authorised capital that the company offers to the public.

Number of shares offered = 80,000

Issued capital = 80,000 × 10

= ₹ 8,00,000

v. Balance in ‘Share Forfeiture Account’ will be shown in ‘Notes to Accounts’ in the Balance Sheet of MK Ltd. under subscribed capital.

Explanation:

The balance of the Share Forfeiture Account is added to the subscribed capital.

vi. The amount of ‘Share Capital’ disclosed in the Balance Sheet of MK Ltd. will be ₹ 7,77,000.

Explanation:

The share capital disclosed in the Balance Sheet of a company is the subscribed capital.

Amount of share capital = 77,000 shares of ₹ 10 each + Balance in share Forfeiture Account

₹ 7,70,000 + 7,000

= ₹ 7,77,000