Question

Assertion (A): A Company is Registered with an authorised Capital of 5,00,000 Equity Shares of ₹10 each of which 2,00,000 Equity shares were issued and subscribed. All the money had been called up except ₹2 per share which was declared as ‘Reserve Capital’. The Share Capital reflected in balance sheet as ‘Subscribed and Fully paid up’ will be Zero.

Reason (R): Reserve Capital can be called up only at the time of winding up of the company.

Options

• Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).

• Both Assertion (A) and Reason (R) are correct, but Reason (R) is not the correct explanation of Assertion (A).

• Assertion (A) is incorrect, but Reason (R) is correct.

• Assertion (A) is correct, but Reason (R) is incorrect.

Answer 1

Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).

Explanation:

Assertion (A): This means ₹8 per share has been called up and paid, so “Subscribed and Fully Paid-up” is not zero, it will be ₹16,00,000 (2,00,000 × ₹8).
So, Assertion (A) is incorrect.

Reason (R): Correct – Reserve Capital is that part of uncalled capital which can only be called at the time of winding up.