Question

Assertion (A): X Ltd. issued 50,000 Equity shares of ₹100 each. It received the full amount on shares except first and final of ₹25 on 200 shares. These 200 shares will be shown as ‘Subscribed but not fully paid Capital’.

Reason (R): The shares on which calls are in arrears are not fully paid. Hence, they will be shown as ‘Subscribed but not fully paid Capital’.

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

Options

• Both (A) and (R) are correct and (R) is the correct reason of (A).

• Both (A) and (R) are correct but (R) is not the correct reason of (A).

• Only (R) is correct.

• Both (A) and (R) are wrong.

Answer 1

Both (A) and (R) are correct and (R) is the correct reason of (A).

Explanation:

Assertion (A) is true, Since the first and final call of ₹25 on 200 shares is unpaid, these shares are not fully paid and will be shown as ‘Subscribed but not fully paid Capital’.

Reason (R) is also true, Shares with calls in arrears are considered not fully paid, so they are shown under ‘Subscribed but not fully paid’.