1. What is the primary governing legislation for companies in India?
A. The Banking Regulation Act
B. The Companies Act, 2013
C. The Insurance Act
D. The SEBI Guidelines
Answer: B. The Companies Act, 2013
2. Which of the following features distinguishes a company from other forms of organization?
A. Unlimited Liability
B. Perpetual Succession
C. Limited Capital
D. Unregulated Operations
Answer: B. Perpetual Succession
3. What is the minimum percentage of issued capital that must be subscribed to consider an issue successful according to SEBI guidelines?
A. 50%
B. 75%
C. 90%
D. 100%
Answer: C. 90%
4. A company with liability limited to unpaid amounts on shares is known as a:
A. Company Limited by Shares
B. Company Limited by Guarantee
C. Unlimited Company
D. Sole Proprietorship
Answer: A. Company Limited by Shares
5. What is the term used for the amount of share capital that a company is authorized to issue?
A. Issued Capital
B. Subscribed Capital
C. Paid-up Capital
D. Authorised Capital
Answer: D. Authorised Capital
MCQs from the Document
6. Who are the real owners of a company?
A. Directors
B. Shareholders
C. Employees
D. Creditors
Answer: B. Shareholders
7. A company’s liability that extends only to the extent of unpaid amounts on shares is termed as:
A. Limited Liability
B. Unlimited Liability
C. Contingent Liability
D. Absolute Liability
Answer: A. Limited Liability
8. Which feature of a company allows it to exist regardless of changes in membership?
A. Separate Legal Entity
B. Limited Liability
C. Common Seal
D. Perpetual Succession
Answer: D. Perpetual Succession
9. The official signature of a company is represented by its:
A. Common Seal
B. Articles of Association
C. Share Certificate
D. Prospectus
Answer: A. Common Seal
10. What is the legal status of a company in the eyes of the law?
A. A living person
B. A natural person
C. An artificial person
D. A citizen
Answer: C. An artificial person
11. Companies that are formed and registered under specific laws for banking or insurance are exceptions to:
A. The Companies Act, 2013
B. SEBI Guidelines
C. Reserve Bank of India Act
D. FEMA Regulations
Answer: A. The Companies Act, 2013
12. What type of shares carry preferential rights regarding dividend payment and capital repayment?
A. Equity Shares
B. Preference Shares
C. Debenture Shares
D. Ordinary Shares
Answer: B. Preference Shares
13. The amount of capital stated in a company's Memorandum of Association is known as:
A. Paid-up Capital
B. Issued Capital
C. Authorised Capital
D. Subscribed Capital
Answer: C. Authorised Capital
14. A shareholder who pays the amount on shares before it is called is said to have made a payment towards:
A. Calls in Advance
B. Calls in Arrears
C. Issued Capital
D. Subscribed Capital
Answer: A. Calls in Advance
15. What is the percentage of shares that can be issued as bonus shares from the securities premium account?
A. 50%
B. 75%
C. 100%
D. Not exceeding unissued share capital
Answer: D. Not exceeding unissued share capital
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16. The liability of members in a company limited by shares is restricted to:
A. The face value of shares held
B. The nominal value of shares held
C. The unpaid value of shares held
D. Their personal assets
Answer: C. The unpaid value of shares held
17. A company with only one person as its member is classified as:
A. Public Company
B. Private Company
C. One Person Company (OPC)
D. Unlimited Company
Answer: C. One Person Company (OPC)
18. The capital that a company raises from the public is termed as:
A. Paid-up Capital
B. Issued Capital
C. Authorised Capital
D. Reserve Capital
Answer: B. Issued Capital
19. Which type of shares are not entitled to preferential rights?
A. Equity Shares
B. Redeemable Preference Shares
C. Cumulative Preference Shares
D. Participating Preference Shares
Answer: A. Equity Shares
20. In the event of winding up, the capital that cannot be called except to pay creditors is termed as:
A. Reserve Capital
B. Paid-up Capital
C. Authorised Capital
D. Called-up Capital
Answer: A. Reserve Capital
21. What is the minimum subscription percentage required for a company to proceed with share allotment?
A. 80%
B. 85%
C. 90%
D. 95%
Answer: C. 90%
22. Which statement about equity shareholders is correct?
A. They receive a fixed rate of dividend.
B. They are creditors of the company.
C. They are entitled to residual profits after paying preference shareholders.
D. Their shares are non-transferable.
Answer: C. They are entitled to residual profits after paying preference shareholders.
23. When shares are issued at a price higher than their nominal value, the excess amount is credited to:
A. Reserve Fund
B. Securities Premium Account
C. Capital Reserve
D. Profit and Loss Account
Answer: B. Securities Premium Account
24. In the case of forfeiture of shares, the amount received up to forfeiture is transferred to:
A. Share Capital Account
B. Forfeited Shares Account
C. Reserve Capital Account
D. Profit and Loss Account
Answer: B. Forfeited Shares Account
25. What does the term "perpetual succession" signify in the context of a company?
A. Continuity of management
B. Indefinite existence irrespective of changes in membership
C. Regular issuance of shares
D. Annual renewal of the company’s registration
Answer: B. Indefinite existence irrespective of changes in membership
26. A shareholder who fails to pay the amount due on calls is said to have:
A. Calls in Advance
B. Calls in Arrears
C. Subscribed Excessively
D. Paid Fully
Answer: B. Calls in Arrears
27. What is the term for a document inviting the public to subscribe to shares of a company?
A. Memorandum of Association
B. Articles of Association
C. Prospectus
D. Share Certificate
Answer: C. Prospectus
28. What is the maximum rate of interest on calls in arrears as per Table F of the Companies Act?
A. 10% per annum
B. 8% per annum
C. 12% per annum
D. 6% per annum
Answer: A. 10% per annum
29. The shares issued to vendors as payment for purchase of assets are termed as:
A. Preference Shares
B. Bonus Shares
C. Shares issued for consideration other than cash
D. Right Shares
Answer: C. Shares issued for consideration other than cash
30. The interest payable on calls in advance cannot exceed which rate per annum?
A. 6%
B. 8%
C. 10%
D. 12%
Answer: D. 12%
31. What is the primary purpose of a company’s Memorandum of Association?
A. To outline the internal management rules
B. To define the scope of the company's operations
C. To regulate the company's accounting procedures
D. To determine the dividend payout policy
Answer: B. To define the scope of the company's operations
32. In the context of company law, a "separate legal entity" means:
A. The company operates independently from its shareholders.
B. Shareholders must actively manage the company.
C. The company cannot sue or be sued.
D. The company does not require a Board of Directors.
Answer: A. The company operates independently from its shareholders.
33. Which account is credited when a company receives application money for shares?
A. Share Capital Account
B. Bank Account
C. Share Application Account
D. Securities Premium Account
Answer: C. Share Application Account
34. What is the term used for the maximum amount of share capital a company can issue?
A. Issued Capital
B. Authorised Capital
C. Paid-up Capital
D. Subscribed Capital
Answer: B. Authorised Capital
35. What happens to the excess application money received in the event of oversubscription?
A. It is refunded or adjusted.
B. It is added to the paid-up capital.
C. It is transferred to the profit and loss account.
D. It is kept as reserve capital.
Answer: A. It is refunded or adjusted.
36. In which account is the unpaid call amount of a shareholder recorded?
A. Calls in Arrears Account
B. Calls in Advance Account
C. Forfeited Shares Account
D. Share Capital Account
Answer: A. Calls in Arrears Account
37. What is the liability of shareholders in a company limited by guarantee?
A. The amount unpaid on their shares
B. The amount they agree to contribute in case of winding up
C. Unlimited liability
D. Their entire personal assets
Answer: B. The amount they agree to contribute in case of winding up
38. The shares issued to employees as a reward for their contribution are known as:
A. Equity Shares
B. Bonus Shares
C. Sweat Equity Shares
D. Right Shares
Answer: C. Sweat Equity Shares
39. What is the term used for the share capital that is actually subscribed by the public?
A. Issued Capital
B. Paid-up Capital
C. Subscribed Capital
D. Reserve Capital
Answer: C. Subscribed Capital
40. What is the typical interval between two calls as per Table A of the Companies Act?
A. 7 days
B. 14 days
C. 21 days
D. 30 days
Answer: D. 30 days
41. The excess amount received when shares are issued at a price higher than their face value is credited to which account?
A. Share Capital Account
B. Securities Premium Account
C. Calls in Advance Account
D. Reserve Account
Answer: B. Securities Premium Account
42. What is the minimum percentage of the face value that must be paid as application money?
A. 3%
B. 5%
C. 10%
D. 12%
Answer: B. 5%
43. When shares are forfeited, the balance of unpaid calls is:
A. Refunded to shareholders
B. Credited to the Securities Premium Account
C. Transferred to the Forfeited Shares Account
D. Written off as a loss
Answer: C. Transferred to the Forfeited Shares Account
44. Which document specifies the rules and regulations for the internal management of a company?
A. Prospectus
B. Memorandum of Association
C. Articles of Association
D. Certificate of Incorporation
Answer: C. Articles of Association
45. What is the rate of interest payable by the company on calls in arrears, as per Table F?
A. 6%
B. 8%
C. 10%
D. 12%
Answer: C. 10%
46. When a company does not call the entire amount of a share, the remaining unpaid portion is termed as:
A. Reserve Capital
B. Called-up Capital
C. Paid-up Capital
D. Uncalled Capital
Answer: D. Uncalled Capital
47. The liability of members in an unlimited company is:
A. Restricted to the nominal value of their shares
B. Restricted to the amount guaranteed by them
C. Unlimited and can extend to their personal assets
D. Equal to the company’s losses
Answer: C. Unlimited and can extend to their personal assets
48. Which type of share provides fixed dividends but does not carry voting rights?
A. Equity Shares
B. Redeemable Preference Shares
C. Ordinary Shares
D. Preference Shares
Answer: D. Preference Shares
49. The total amount received by a company on shares is recorded in which account?
A. Calls in Advance Account
B. Share Capital Account
C. Securities Premium Account
D. Reserve Capital Account
Answer: B. Share Capital Account
50. The minimum number of members required to form a public company is:
A. 1
B. 2
C. 5
D. 7
Answer: D. 7
51. A shareholder who pays money for future calls before they are due makes payment toward:
A. Forfeited Shares
B. Calls in Advance
C. Unpaid Calls
D. Reserve Capital
Answer: B. Calls in Advance
52. A company must return application money to investors if the minimum subscription is not received within:
A. 120 days of issue
B. 90 days of issue
C. 60 days of issue
D. 30 days of issue
Answer: A. 120 days of issue
53. A share is said to be issued at par when:
A. Its issue price is equal to its nominal value
B. Its issue price is more than its nominal value
C. Its issue price is less than its nominal value
D. No amount is received on the share
Answer: A. Its issue price is equal to its nominal value
54. Under which category does the Securities Premium Account appear in a company's balance sheet?
A. Reserves and Surpluses
B. Share Capital
C. Current Liabilities
D. Fixed Assets
Answer: A. Reserves and Surpluses
55. What is the name given to shares issued free of charge to existing shareholders from the company’s reserves?
A. Right Shares
B. Sweat Equity Shares
C. Bonus Shares
D. Preference Shares
Answer: C. Bonus Shares
56. Which of the following cannot be used to issue fully paid bonus shares?
A. Securities Premium Account
B. Capital Redemption Reserve
C. General Reserve
D. Calls in Arrears
Answer: D. Calls in Arrears
57. Shares that are issued at a discount are usually:
A. Equity Shares
B. Right Shares
C. Bonus Shares
D. Forfeited Shares
Answer: D. Forfeited Shares
58. If a company issues 5,000 shares of ₹10 each at ₹12, what is the total securities premium collected?
A. ₹10,000
B. ₹50,000
C. ₹60,000
D. ₹70,000
Answer: A. ₹10,000
59. What is the term for the minimum subscription amount that must be raised for a valid share issue?
A. Reserve Capital
B. Nominal Capital
C. Minimum Subscription
D. Subscribed Capital
Answer: C. Minimum Subscription
60. In case of over-subscription, the excess money received on rejected applications is:
A. Refunded to applicants
B. Credited to share capital
C. Added to securities premium
D. Adjusted against reserve capital
Answer: A. Refunded to applicants
61. What is the name of the document issued to inform the public about the offer of shares?
A. Articles of Association
B. Memorandum of Association
C. Prospectus
D. Share Certificate
Answer: C. Prospectus
62. A company may raise funds by issuing shares and:
A. Loans
B. Debentures
C. Dividends
D. Retained Earnings
Answer: B. Debentures
63. The portion of share capital which has been called up but remains unpaid is termed as:
A. Subscribed Capital
B. Calls in Arrears
C. Reserve Capital
D. Paid-up Capital
Answer: B. Calls in Arrears
64. A company that restricts the transfer of its shares and limits its members to 200 is a:
A. Public Company
B. One Person Company
C. Private Company
D. Unlimited Company
Answer: C. Private Company
65. What is the maximum number of members allowed in a private company (excluding employees)?
A. 50
B. 100
C. 200
D. Unlimited
Answer: C. 200
66. When a shareholder fails to pay the amount due on shares, the company may take what action?
A. Issue bonus shares
B. Convert shares to preference shares
C. Forfeit the shares
D. Pay dividends
Answer: C. Forfeit the shares
67. The amount received by a company for shares issued but not fully paid up is referred to as:
A. Issued Capital
B. Paid-up Capital
C. Reserve Capital
D. Subscribed Capital
Answer: B. Paid-up Capital
68. The capital that a company cannot call except during winding up is called:
A. Uncalled Capital
B. Reserve Capital
C. Paid-up Capital
D. Issued Capital
Answer: B. Reserve Capital
69. Which of the following is an artificial person in the eyes of the law?
A. Sole Proprietorship
B. Partnership
C. Company
D. Cooperative Society
Answer: C. Company
70. What is the portion of the issued capital that is subscribed by the public known as?
A. Subscribed Capital
B. Reserve Capital
C. Paid-up Capital
D. Authorised Capital
Answer: A. Subscribed Capital
71. Equity shareholders are entitled to:
A. Fixed dividends
B. Residual profits after preference dividends
C. First claim on assets during liquidation
D. A guaranteed return on investment
Answer: B. Residual profits after preference dividends
72. The minimum subscription amount must cover which of the following expenses?
A. Dividend payments
B. Preliminary expenses and working capital
C. Preference share repayments
D. Securities premium
Answer: B. Preliminary expenses and working capital
73. The part of the capital that has been issued and fully paid is referred to as:
A. Subscribed Capital
B. Issued Capital
C. Paid-up Capital
D. Called-up Capital
Answer: C. Paid-up Capital
74. A company issuing shares to the public at a price lower than their nominal value violates:
A. The Companies Act
B. SEBI Guidelines
C. Reserve Bank of India Regulations
D. Both A and B
Answer: D. Both A and B
75. Shares issued to existing shareholders in proportion to their current holdings are called:
A. Bonus Shares
B. Right Shares
C. Preference Shares
D. Sweat Equity Shares
Answer: B. Right Shares
76. A shareholder paying more than the amount called on their shares is recorded as:
A. Paid-up Capital
B. Securities Premium
C. Calls in Advance
D. Calls in Arrears
Answer: C. Calls in Advance
77. The legal status of a company ensures it has which characteristic?
A. Limited liability
B. Perpetual succession
C. Separate legal entity
D. All of the above
Answer: D. All of the above
78. What type of liability applies to the members of a company limited by guarantee?
A. Limited to unpaid shares
B. Unlimited liability
C. Limited to the amount guaranteed in the Memorandum
D. Liability ceases after share allotment
Answer: C. Limited to the amount guaranteed in the Memorandum
79. What is the primary purpose of issuing shares at a premium?
A. To increase shareholder liability
B. To raise additional funds for the company
C. To reduce authorised capital
D. To bypass SEBI regulations
Answer: B. To raise additional funds for the company
80. The company's common seal serves as:
A. Its official signature
B. A record of dividends paid
C. Proof of shareholder meetings
D. Authorization for directors’ decisions
Answer: A. Its official signature
81. The liability of shareholders in a company limited by shares is restricted to:
A. Their personal assets
B. The unpaid value of their shares
C. The company's total losses
D. The company’s authorized capital
Answer: B. The unpaid value of their shares
82. What type of share gives its holder the right to participate in surplus profits after a fixed dividend has been paid?
A. Equity Shares
B. Participating Preference Shares
C. Redeemable Preference Shares
D. Non-Participating Preference Shares
Answer: B. Participating Preference Shares
83. What happens to the forfeited shares if they are later reissued?
A. The proceeds are credited to a new issue account
B. They are treated as a loss in the profit and loss account
C. The amount received is transferred to the Capital Reserve Account
D. They are refunded to the original shareholder
Answer: C. The amount received is transferred to the Capital Reserve Account
84. When shares are issued at a premium, the premium amount is recorded under which account?
A. Share Capital Account
B. Securities Premium Account
C. Calls in Advance Account
D. Forfeited Shares Account
Answer: B. Securities Premium Account
85. The process of returning the application money of rejected applicants in the event of over-subscription is termed as:
A. Refund of Calls
B. Return of Subscriptions
C. Refund of Application Money
D. Adjustment of Excess Applications
Answer: C. Refund of Application Money
86. A company that has only one person as its member is classified as a:
A. Private Company
B. Unlimited Company
C. One Person Company (OPC)
D. Sole Proprietorship
Answer: C. One Person Company (OPC)
87. A company’s Articles of Association govern its:
A. Relationship with shareholders and creditors
B. Internal management and operations
C. Financial statements preparation
D. Issuance of securities in the stock market
Answer: B. Internal management and operations
88. The maximum permissible rate of securities premium charged by a company is governed by:
A. The Companies Act, 2013
B. SEBI Guidelines
C. RBI Regulations
D. Ministry of Corporate Affairs
Answer: B. SEBI Guidelines
89. The company capital that is not offered for public subscription is called:
A. Reserve Capital
B. Unissued Capital
C. Paid-up Capital
D. Uncalled Capital
Answer: B. Unissued Capital
90. The amount called by the company for the first time after the application and allotment is referred to as:
A. First Call Money
B. Subscribed Capital
C. Paid-up Capital
D. Reserve Capital
Answer: A. First Call Money
91. The amount of application money to be received per share should be at least:
A. 2% of the nominal value
B. 3% of the nominal value
C. 5% of the nominal value
D. 10% of the nominal value
Answer: C. 5% of the nominal value
92. In a pro-rata allotment, excess application money is generally adjusted against:
A. Calls in Advance
B. Securities Premium
C. Calls Due on Allotment
D. Paid-up Capital
Answer: C. Calls Due on Allotment
93. Equity shares with differential rights may differ in terms of:
A. Voting rights and dividend payments
B. Redemption options
C. Face value
D. Eligibility for preference dividends
Answer: A. Voting rights and dividend payments
94. According to the Companies Act, 2013, a public company must have at least how many directors?
A. 2
B. 3
C. 5
D. 7
Answer: B. 3
95. What is the typical notice period required for calls as per Table F of the Companies Act?
A. 7 days
B. 14 days
C. 21 days
D. 30 days
Answer: B. 14 days
96. When shares are issued at a premium, the premium amount cannot be used for:
A. Writing off preliminary expenses
B. Paying dividends to shareholders
C. Issuing bonus shares
D. Writing off commission paid for raising shares
Answer: B. Paying dividends to shareholders
97. If the company receives more applications than the number of shares issued, this situation is called:
A. Under Subscription
B. Over Subscription
C. Full Subscription
D. Premium Subscription
Answer: B. Over Subscription
98. The repayment of borrowed funds using premium collected on shares is termed as:
A. Dividend Distribution
B. Redemption of Debentures
C. Payment of Arrears
D. Reserve Creation
Answer: B. Redemption of Debentures
99. What is the document issued to prove ownership of shares called?
A. Prospectus
B. Share Certificate
C. Share Warrant
D. Articles of Association
Answer: B. Share Certificate
100. If shares are issued at a discount, the discount must be shown as a:
A. Profit in the income statement
B. Loss in the income statement
C. Deduction from the share capital
D. Debit to a special discount account
Answer: D. Debit to a special discount account
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