CIE Accounting Paper-2: Specimen Questions with Answers 75 - 77 of 103

Passage

Susan Ltd was registered on April 1st 2011 with a capital of £10000000 divided into £1000000 shares of £10 each. The company offered 44000 shares of which 40000 shares were taken up by the public. £1 was received with application. On May 2nd these shares were allotted and by 31st may £2 per share was received as allotment money. First call of £3 per share was made on 30th June, and call money was received with an exception of 100 shares. Final call was made £4 per share and call money was received by 30th September with an exception of 400 shares.

Question number: 75 (2 of 5 Based on Passage) Show Passage

Essay Question▾

Describe in Detail

What does Susan Ltd mean by the term Share capital?

Explanation

In the given situation the term share capital refers to the amount which Susan Ltd wishes to raise for its business activities, through public financing. Share capital constitutes the main source of finance in large companies. Share capital is raised through the issue of shares to the public either at par, premium or discount.

Question number: 76 (3 of 5 Based on Passage) Show Passage

Essay Question▾

Describe in Detail

Classify the categories of share capital of Susan Ltd?

Explanation

In the case of Susan Ltd, the share capital can be classified as:

(i) Authorized share Capital: The maximum amount of capital which Susan Ltd can raise through the issue of shares.

(ii) Subscribed share capital: The monetary value of shares on which the public has shown interest to purchase.

(iii) Issued Share capital: This is the monetary value of shares which the company has issued to the interested public.

(iv) Called up capital: The monetary value which will be received on a later date on shares that have been issued to the public

Question number: 77 (4 of 5 Based on Passage) Show Passage

Essay Question▾

Describe in Detail

Susan Ltd issued 44000 shares and public took only 40000 shares. What are these called as and explain them briefly.

Explanation

Susan Ltd issued 44000 shares and public took only 40000 shares; this means Susan Ltd wanted to raise stock value for its company for 44000 shares. This is called as issued capital. The public took only 40000 shares refer to the interest of the public in the company’s stock. This is called as Subscribed share capital.