Q.Fill in the blank: Shares arrange ……… for a business. (Finance / goods)
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🔒 Start your 14-day free trial to unlock the full solution →Concept understanding — Issue of Shares
The capital a company raises by issuing shares is its share capital; the capital is divided into small units called shares, each with a nominal (face) value, and the holder is a shareholder. A company issues two types: equity shares and preference shares.
Equity shares are the most important source of long-term ownership capital. Equity holders get no fixed dividend — they are residual owners, paid whatever is left after all other claims, so they bear the greatest risk (though liability is limited) and, through voting rights, participate in management. Equity is permanent capital raised without any charge on assets and gives the firm creditworthiness, but returns fluctuate, it is costlier than other sources, and fresh issues dilute existing holders' control and earnings. …
Shares are issued by a company specifically to raise money from the public, so they are a source of finance for the business, …
Shares arrange Finance for a business.
Issuing shares (equity or preference) is one of the principal ways a public company raises long-term capital — investors buy shares and the company receives the sale proceeds as finance to fund its operations and expansion, in exchange for ownership rights/divid …
- CBSE 2026Set MARCH1 markMCQQ.The amount received over and above the par value is credited to :(a) Share capital account(b) Securities premium account(c) Forfeited shares account(d) Calls in advance account
›Reveal solutionSolution
Amount received above par value = premium → credited to Securities Premium account. Option (b).
A share has a face/par value (say ₹10). If a company issues it at ₹12, the ₹10 is capital and the extra ₹2 is a premium on issue.
- Share Capital account is credited only with the nominal (face) value called up.
- The excess over face value is a capital receipt and must be credited to the Securities Premium account (a statutory reserve with restricted uses under the Companies Act — e.g. issuing bonus shares, writing off preliminary expenses). …
- CBSE 2025Set MARCH1 markMCQQ.When shares are issued for purchase of assets, the amount should be credited to :(a) Vendor's A/c(b) Sundry Assets A/c(c) Share Capital A/c(d) Bank A/c
›Reveal solutionSolution
Shares issued for the purchase of assets are credited to the Share Capital Account.
When a company buys assets and pays the vendor by issuing shares (Company Accounts, TN HSC Commerce), the entries are:
- On purchase: Sundry Assets A/c Dr — To Vendor's A/c
- On issue of shares to vendor: Vendor's A/c Dr — To Share Capital A/c …
- CBSE 2025Set HY1 markQ.Fill in the blank: Shares arrange ……… for a business. (Finance / goods)
›Reveal solutionSolution
Shares arrange Finance for a business.
Issuing shares (equity or preference) is one of the principal ways a public company raises long-term capital — investors buy shares and the company receives the sale proceeds as finance to fund its operations and expansion, in exchange for ownership rights/divid …
- CBSE 2024Set MARCH1 markMCQQ.The amount received over and above the par value is credited to :(a) Share capital account(b) Securities premium account(c) Forfeited shares account(d) Calls in advance account
›Reveal solutionSolution
The excess of issue price over face value is share premium, credited to the Securities Premium account.
In the Tamil Nadu HSC Class-12 Accountancy syllabus (Company Accounts), a share has a fixed par/face value. A company may issue it at par, at a premium, or (rarely) at a discount.
- If shares are issued at a premium, the price charged is higher than the face value. Only the face value is credited to Share Capital A/c; the extra amount (the premium) is credited to the Securities Premium A/c.
- Securities premium is a capital reserve, governed by the Companies Act, and can be used only for specified purposes (issuing bonus shares, writing off preliminary expenses, providing premium on redemption, buy-back, etc.). …
- CBSE 2022Set MARCH1 markMCQQ.The amount received over and above the par value is credited to ________.(a) Share capital account(b) Securities premium account(c) Forfeited shares account(d) Calls in advance account
›Reveal solutionSolution
The excess of issue price over par (face) value is share premium and is credited to the Securities Premium Account, so the answer is option (b).
When a company issues shares, the price collected can be split into two parts:
- The par (face) value, which goes to the Share Capital Account.
- Any amount collected over and above the par value, which is the premium.
Under the Companies Act, the premium collected cannot be treated as ordinary revenue or as share capital — it is a capital receipt kept in a distinct Securities Premium Account, whose use is restricted by law (e.g. issuing bonus shares, writing off preliminary expenses or discount on issue, premium on redemption).
Why the other options are wrong: …
- CBSE 2020Set MARCH1 markMCQQ.When shares are issued for purchase of assets, the amount should be credited to :(a) Bank Account(b) Vendors Account(c) Sundry Assets Account(d) Share Capital Account
›Reveal solutionSolution
On issue of shares for the purchase of assets, Share Capital Account is credited — option (d).
When a company buys assets and pays by issuing shares to the vendor, two stages arise:
- On purchase: Sundry Assets A/c Dr, To Vendor's A/c.
- On issue of shares to settle the vendor: Vendor's A/c Dr, To Share Capital A/c (and Securities Premium, if issued at a premium). …
- CBSE 2020Set MARCH1 markMCQQ.Match the following :(1) Under subscription —(i) Amount prepaid for calls(2) Over subscription —(ii) Subscription above the offered shares(3) Calls in arrear —(iii) Subscription below the offered shares(4) Calls in advance —(iv) Amount unpaid on calls(a) (1)-(iii), (2)-(iv), (3)-(i), (4)-(ii)(b) (1)-(i), (2)-(ii), (3)-(iii), (4)-(iv)(c) (1)-(iv), (2)-(iii), (3)-(ii), (4)-(i)(d) (1)-(iii), (2)-(ii), (3)-(iv), (4)-(i)
›Reveal solutionSolution
Correct matching is (1)-(iii), (2)-(ii), (3)-(iv), (4)-(i) — option (d).
Matching each share-issue term to its meaning:
Term Meaning Match (1) Under subscription Subscription below the offered shares (iii) (2) Over subscription Subscription above the offered shares (ii) (3) Calls in arrear Amount unpaid on calls (iv)
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