Question

Assertion (A): In case of shares issued on Pro-rata basis, excess money received at the time of application in the absence of information can be utilised till allotment only.

Reason (R): Company has to pay interest on calls in advance for amount adjusted towards calls (if any).

In the context of the above two statements, which of the following is correct?

Options

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

• Both (A) and (R) are true and (R) is a correct explanation of (A).

• Both (A) and (R) are false.

• (A) is false, but (R) is true.

Answer 1

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

Explanation:

A is true: If excess application money is received during pro-rata allotment and nothing is mentioned, it is adjusted only till allotment.

R is true: Interest is payable if the excess amount is adjusted towards future calls, not just allotment.