Classification of Share Capital - Topic 1

Select the correct option.

__________refers to capital made up of Equity and preference shares

• Share capital

• Debt capital

• Reserve fund

Answer explanation

Share capital is the fund raised by a company by issuing shares to the general public. Share capital refers to the capital made up of Equity Shares and Preference Shares. It is a long term source of finance through which shareholders gain a share of ownership in the company.

Select the correct option.

________ capital refers to maximum capital a company can raise by issuing shares.

• Issued

• Authorised

• Paid–up

Answer explanation

The amount of share capital mentioned in the capital clause of the company’s Memorandum of Association is an authorised capital. The company cannot issue shares more than the authorised capital.

Select the correct option.

___________ capital is a part of uncalled capital.

• Subscribed

• Reserve

• Issued

Answer explanation

The balance capital which is not demanded from the shareholders is called as uncalled capital.

Give a word or a term or a phrase.

Capital collected by way of issue of Equity and Preference shares.

Give a word or a term or a phrase.

Part of issued capital subscribed by investors.

Answer explanation

The application received by a company for the issued share and the capital received for the same is termed as the subscribed capital. The public may or may not subscribe for the entire issued capital.

Give a word or a term or a phrase.

Capital that will be collected only at the time of winding up of a company.

Answer explanation

Reserve capital is a part of uncalled capital. If management feels that called-up capital is sufficient for business and in future there will be no requirement of such capital, special resolution is passed in the shareholders meetings to keep reserve capital. It is known as reserve capital.

Give a word or a term or a phrase.

It is also called as ‘Capitalisation of Profits’.

State whether true or false.

Shares not offered to the public for subscription is called as subscribed capital.

• 
• 

Find the odd one.

Authorised capital, Equity share capital, Issued capital, Paid-up capital

• Authorised capital

• Equity share capital

• Issued capital

• Paid-up capital

Complete the sentence.

Share capital refers to capital made up of Equity shares and ____________.