Thursday, February 3, 2011

Chapter # 5 . JOINT STOCK COMPANY


Chapter # 5 COMPANY
Q.1: What is a Joint stock company?
Ans: A company is an artificial person created by law having separate legal entity with a permanent existence and common seal.
Q.2: What is meant by separate legal entity of company?
Ans: It means that the company a d its owners live independently company work on its own name. it is not affected with the death or insolvency etc. of any shareholder.
Q.3: What do you mean by common seal of a Joint stock company?
Ans: A company lives its own name but it cannot sign its documents like natural person so a seal with the name of company is used instead of signatures.
Q.4: Under which ordinance company is formed?
Ans: Joint stock company is formed under the companies ordinance 1984.
Q.5: What is the liability of share holders in Joint stock company.
Ans: liability fo share holders in Joint stock company is limited upto the value of shares purchased.
Q.6: Can share holders transfer their shares of joint stock company?
Ans: Yes, they can transfer their shares though stock exchange.
Q.7: Is there any restriction on maximum number of share holders in public limited company?
Ans: There is no limit on maximum number of share holders in Public limited company.
Q.8: Give any three characteristics of a company?
Ans: 1)     An artificial person2)     Separate legal entity 3)     Limited liability.
Q.9: Give any three advantages of Joint stock company?
Ans: 1)     Large capital2)     Limited liability 3)     Specialization
Q.10: Give any three disadvantages of Joint stock company?
Ans: 1)     Double Taxation2)     Complex Formation 3)     Lack of secrecy
Q.11: Classify the company according to incorporation?
Ans: 1)     Chartered company2)     Statutory company 3)     Registered company
Q.12: Classify company with respect to liability?
Ans: 1)     Company limited by shares2)     Company limited by guarantee 3)     Unlimited company
Q.13: Write any three kinds of company according to ownership?
Ans: 1)     Public company2)     Private company 3)     Subsidiary company
Q.14: How many are the types of public limited company?
Ans: 1)     Company limited by guarantee2)     Company limited by shares.
Q.15: Define Memorandum of Association?
Ans: A document which set out the constitution of the company and as such the foundation upon which the structure of the company is based is called memorandum Association.
Q.16: Define Articles of Association?
Ans: Rules and regulations subordinate to memorandum of association which deals with the internal management of company is called Articles of Association.
Q.17: What do you know about Promoters?
Ans: The persons who undertake to form a company with reference to given objects and set its going and takes the necessary steps to accomplish these purposes are called promoters.
Q.18: What is Incorporation?
Ans: To register company with the register of company by promoters according to company ordinance 1984 is called Incorporation.
Q.19: What is Incorporation certificate?
Ans: A certificate issued by a registrar of a company after registering the company according to company ordinance 1984 to promoters of company is called Incorporation Certificate.
Q.20: What is the major difference between the memorandum of Association and the Articles of Association?
Ans: Memorandum of Association is a primary document and Articles of Association is a subsidiary document.
Q.21: What do you know about preliminary expenses?
Ans: Expenses which are incurred by the promoters in the process of formation of a company are called preliminary expenses.
Q.22: What is statutory company?
Ans: The company which has more than 50% shares of another company is called holding company.
Q.23: What is holding company?
Ans: A company which has more than 50% shares of another company is called holding company.
Q.24: What is Subsidiary company?
Ans: A company whose more than 50% shares are in the hand of any other company is called Subsidiary company.
Q.25: What is Chartered Company?
Ans: A company which is formed by the royal order is called chartered company.
Q.26: Name any two chartered companies in Pakistan?
Ans: There is no existing of Royal system in Pakistan, so there is no company which was formed by Royal order.
Q.27: Name any one major difference between the public company and private company?
Ans: A public company can issue prospectors to invite public for purchase of shares while private company cannot issue prospectus.
Q.28: What is unlimited company?
Ans: A company in which the liability of its shareholders is unlimited called unlimited company.
Q.29: What is company limited by Guarantee?
Ans: A Company in which each shareholder provides a guarantee to contribute a specified amount to company in the result of its being wound up due to certain circumstances.
Q.30: What is Company Limit4ed by shares?
Ans: A company in which the liability of its shareholders is limited to the extent of value of their shares is called company limited by shares.
Q.31: What is registered company? Give its two kinds?
Ans: A company which is incorporated under company ordinance 1984 called registered company.1)     Unlimited company 2)     Company limited by shares.
Q.32: Give any three characteristics of private limited company?
Ans: 1)     It cannot transfer its shares.2)     Restricted number of shareholders.
Q.33: What is prospectus?
Ans: A document published by the promoters after the formation of a company to invite the public to buy shares of the company is called prospectus.
Q.34: What is Statement in Lieu of Prospectus?
Ans: If a Public company cannot deposit prospectus due to certain reasons in the registrar office, for time being a statement like prospectus deposited in registrar office, is called statement in lieu of prospectus.
Q.35: What is capital of a company?
Ans: The amount invested by the shareholders in a company is called capital.
Q.36: What is authorized capital?
Ans: A maximum amount of capital about which a company is authorized to issue is called authorized capital.
Q.37: What is Issued capital?
Ans: A part of authorized capital for which people are invited to purchase the shares is called issued capital.
Q.38: What is paid up capital?
Ans: Amount of capital which is subscribed by people against issued capital is called paid up capital.
Q.39: What is a Share?
Ans: An authorized capital of a company is divided into equal units which are called shares A single unit is called share.Or A certificate issued by the company against some subscription which gives the right and profit to its holder is called share.
Q.40: What is share certificate?
Ans: Documents of title of a share held in a company by the shareholder is called share certificate.
Q.41: What is dividend?
Ans: A profit of a company which is distributed among shareholders is called dividend.
Q.42: Who is underwriter?
Ans: A person (Institution) who promises to promoters to buy the remaining shares of a company that are not bought by general public is called underwriter.
Q.43: What is underwriting commission?
Ans: A commission which is paid to underwriters is called underwriting commission.
Q.44: What do you know about minimum subscription?
Ans: The amount fixed by the Directors and mentioned in the Articles of Association and prospectus which must be subscribed by the public before allotment of shares is called minimum subscription.
Q.45: Name any two types of shares?
Ans: (a)               Ordinary shares(b)              Preference shares.
Q.46: Define preference shares?
Ans: Those shares of a company on which fixed rate of dividend is paid before ordinary shares.
Q.47: When shares applications are received, what entry will be passed?
Ans: Bank a/cTo Share applications A/c
Q.48: When extra shares applications are refunded, what entry will be passed?
Ans: Share applications a/cTo Bank a/c
Q.49: Name different terms of issue of shares?
Ans: (1) At par                    (2) At premium                      (3) At discount
Q.50: when shares are allotted to shareholders at par what entry will be passed?
Ans: Share application s a/cTo share capital a/c
Q.51: What entry will be passed if shares are issued at premium?
Ans: Share application a/cTo Share capital a/c To Premium on issue of shares a/c
Q.52: What entry will be passed, if shares are issued at discount?
Ans: Share applications a/cDiscount on issue of shares a/c To Share capital a/c
Q.53: What do you know about the term at par in issuance shares?
Ans: If the share is issued at actual price it means at price equal to the nominal value for example share of Rs. 10 is issued at Rs. 10.
Q.54: What is meant by At premium in issuance of shares?
Ans: If the share is issued at a price above than its nominal value such issued price is called at premium, for example, share of Rs. 10 is issued at Rs. 15.
Q.55: What is meant by At discount in issuance of shares?
Ans: If the share is issued at a price below the nominal value of face value of shares. For example share of Rs. 10 is issued at Rs. 9.
Q.56: What entry will be passed when shares are issued other than cash?
Ans: Vendors a/cTo Share capital a/c
Q.57: What entry will be passed for writing off the discount on issue of shares?
Ans: Share Premium a/c or reserves a/cTo discount on issue of shares a/c
Q.58: What is debenture?
Ans: A certificate issued to creditors (Investors) by the company for security of debts under the seal of a company is called debenture.
Q.59: Names different types of debentures according to security?
Ans: 1)     Naked debentures2)     Mortgage debentures
Q.60: Define Naked debentures?
Ans: Debentures which are secured against the charge on assets of company are called mortgage Debentures.
Q.61: Define Mortgage Debentures?
Ans: Debentures which are secured against the charge on assets of company are called mortgage Debentures.
Q.62: Name different kinds of debentures according to redemption point of view?
Ans: 1)     Redeemable debentures2)     Irredeemable debentures
Q.63: What are Redeemable debentures.
Ans: debentures which are redeemed to company by debenture holders after a specified period of time against payment are called Redeemable Debentures.
Q.64: What are Irredeemable debentures.
Ans: Debentures which are not redeemed during the life of a company are called irredeemable debentures.
Q.65: Name different kinds of debentures according to conversion?
Ans: 1)     Convertible debentures.2)     Non Convertible debentures.
Q.66: Define Convertible debentures?
Ans: Debentures which can be converted into shares after fulfillment of certain conditions are called convertible Debentures.
Q.67: Define Non Convertible debentures?
Ans: Debentures which cannot be converted into shares during the life of a company are called Non convertible debentures.
Q.68: Write different kinds of debentures according to recording point of view?
Ans: 1)     Bearer Debentures2)     Registered Debentures
Q.69: What are Bearer debentures?
Ans: The debentures which are payable to bearer are called bearer denentures.
Q.70: What are Registered debentures?
Ans: The debentures in which name of their holders are registered in the books of a company are called registered debentures.
Q.71: What entry will be passed, when debentures are issued at par?
Ans: Bank a/cTo Debentures a/c
Q.72: What entry will be passed when debentures are Issued at premium?
Ans: Bank a/cTo Debentures a/c To Debenture Premium a/c
Q.73: Pass the Journal entry of debentures are issued at discount?
Ans: Discount on issue of debentures a/cTo Debentures a/c
Q.74: Pass the Journal entry if debentures are issued other than cash?
Ans: Vendors a/cTo Debentures a/c
Q.75: If debentures are issued at par and redeemable at par what Journal entry should be passed?
Ans: Bank a/cTo Debentures a/c
Q.76: What is under subscription?
Ans: If a company receives less applications for issue capital, this situation represents under – subscription.
Q.77: What is over – subscription?
Ans: I a company receives more applications than issued capital, this situation represents over – subscription.
Q.78: What method is adopted for allotment of shares by company to surplus / over shares applications submitted by public?
Ans: Company will refund these applications along with their application money to applicants.
Q.79: Crescent limited purchased assets of Rs. 285,000 from Usman traders. It issued equity shares of Rs. 10 each in satisfaction of their claim at 5% discount. How much shares will be issued to usman traders.
Ans: Issue price = Face value – discount= 10 – 5% = 10 - .5 = 9.5
Total shares = 285,000 / 9.5 = 30000
Q.80: If nominal value of a share is Rs. 10 and it is issued at 8% premium Find the issue price of a share?
Ans: Issue price = Nominal value + Premium10 + .8 = 10.8
Q.81: What is debenture stock?
Ans: A converted debenture into share represents debentures stock.
Q.82: What is the difference between a debenture and a debenture stock?
Ans:
Debenture Debenture stock
1)     It may be partly paid It must be fully paid
2)     Debenture is wholly transferable Debenture stock can be transferred multiple of a rupee or fraction of a rupee.
Q.83: Differentiate between the shareholder and debenture holder with the help of two points.
Ans:
Shareholder Debenture holder
1)     Shareholder is an owner of the company. Debenture holder is a creditor of a company.
2)     Shareholder is entitled to dividend. Debenture holder is entitled to interest.
Q.84: Pass journal entry for issue of debenture having face value o Rs. 10 under the condition of issue at per & redeemable at par?
Ans: Bank A/c         10To Debentures A/c    10
Q.85: Pass journal entry for issue of debenture having face value of Rs. 10 under the condition of issue at per & redeemable at premium of 10%?
Ans: Bank A/c                                                         10Loss in issue of debentures A/c                   1 To Debenture A/c                                                      10
To Premium on redemption of debenture A/c        1
Q.86: Pass journal entry for issue of debenture having face value of Rs. 10 under the condition of issue at 10% discount and redeemable at per?
Ans: Bank A/cDiscount on issue of debentures A/c          1 To debentures A/c                                         10
Q.87: Pass journal entry for issue of debenture having face value of Rs. 10 under the conditionof issued at 10% premium and redeemable at par?
Ans: Bank A/c                                             11To Debentures A/c                            10 To Premium on debenture                1
Q.88: Pass journal entry for issue of debenture having face value of Rs. 10 under the condition of issued at 10% discount and redeemable at premium o 10%?
Ans: Bank A/c         9Loss on issue of debentures A/c      2 To Debentures A/c                                                                10
To Premium on redemption of debentures A/c                  1
Q.89: A company issued, 1000 6% debenture of Rs. 100 each under the condition of issued at 4% discount but redeemable at premium of 5% pass journal entry?
Ans: Bank A/c                                                         960000Loss on issue of debentures A/c                      9000 To 6% debentures A/c                                                          100,000
To Premium on redemption of debentures A/c                  5000
Q.90: Write any three source of redemption of debentures?
Ans: 1)     Redemption of debentures out of profit.2)     Redemption of debentures out of capital 3)     Redemption of debentures by conversion into shares or new debentures.

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