CBSE Class 12 Accountancy Chapter 6 Accounting for Share Capital — 20 MCQs with Answers

Share issue is the foundation of share capital accounting. Companies issue shares at par, premium, or discount in accordance with the Companies Act. MCQs in this section test definitions, legal provisions, and journal entries for share application and allotment. Understanding the flow — application money received, allotment money due, and calls made — is crucial. Many students confuse securities premium with share capital; remember that any premium collected is credited to Securities Premium Reserve, not Share Capital. The Companies Act prohibits issue of equity shares at a discount except in rare cases like sweat equity. These questions build on Section 39 to 41 of the Companies Act and NCERT Chapter 6 terminology.

Calls in arrears arise when a shareholder does not pay the allotment or call money by the due date. The unpaid amount is debited to Calls in Arrears (a contra account deducted from Share Capital). Calls in advance occur when a shareholder pays call money before it is formally due; this is credited to Calls in Advance (a liability). Many MCQs test whether interest on calls in arrears and calls in advance is mandatory or discretionary. According to Table F of the Companies Act and NCERT guidance, interest on calls in arrears is charged at a prescribed rate only if the Articles permit, and interest on calls in advance is paid at a rate not exceeding 12% per annum if Articles allow. Distinguishing between the two accounts and their presentation in the balance sheet is a frequent board exam question.

Forfeiture occurs when a shareholder defaults on call payments and the company cancels the shares after following due legal process. The shares revert to the company and can be reissued. On forfeiture, Share Capital is debited with the called-up amount, and the accounts of application, allotment, and calls (paid and unpaid) are credited. Any paid-up amount is transferred to Share Forfeiture Account, which represents the capital profit available for writing off capital losses or issuing bonus shares. MCQs often test the journal entries, the nature of Share Forfeiture Account (capital reserve), and the legal requirement that forfeiture must be authorized by the Articles. A common mistake is treating Share Forfeiture as a revenue reserve; it is a capital reserve and not distributable as dividends.

Forfeited shares can be reissued at par, premium, or discount. The key rule is that the discount on reissue plus any loss (if paid-up amount was less than reissue price) cannot exceed the credit balance in Share Forfeiture Account for those specific shares. On reissue, Bank is debited with the amount received, Share Forfeiture is debited with the discount allowed or loss on reissue, and Equity Share Capital is credited with the face value. Any surplus left in Share Forfeiture after reissue is transferred to Capital Reserve. MCQs test whether reissue below the original paid-up amount is permissible (yes, as long as it does not exceed forfeited credit), the journal entries, and the treatment of any remaining balance. Understanding the link between forfeiture credit and reissue discount is critical for scoring full marks.

CBSE increasingly includes assertion-reason MCQs and short case-based scenarios in Class 12 Accountancy. Assertion-reason questions present two statements: Assertion (A) and Reason (R). You must decide if both are true, if R correctly explains A, or if one is false. Case-based MCQs describe a company scenario — for example, issue of 20,000 shares with calls in arrears by some shareholders — and ask two to three sub-questions. These test integrated understanding: you need to calculate amounts, determine correct accounts, and apply legal provisions together. Practice these formats because they carry 2 or 3 marks each and can swing your Section-A score significantly. Always read the assertion and reason independently first, then check the logical link.

Section-A of the CBSE Class 12 Accountancy paper carries 16 to 20 marks as MCQs (1 mark each). Time management is critical: aim to spend 10 to 12 minutes on this section. Read each question carefully—many options are close distractors. For numerical MCQs, do rough calculations in the margin; cross-verify your answer by checking if debits equal credits or if the balance tallies. For assertion-reason questions, evaluate each statement independently before checking the logical link. If you are unsure, use elimination: discard clearly wrong options first, then choose between the remaining two. Never leave an MCQ blank; there is no negative marking in CBSE board exams, so guess intelligently if you must. Mark answers on the OMR sheet carefully, and if time permits, review your answers once. Practice 20 MCQs daily in the final month to build speed and accuracy. For concept doubts or step-by-step solving, CBSETUTOR.ai offers 24×7 AI tutoring with photo upload at a flat ₹999/month for Classes 6 to 12—one price, all subjects, with a 3-day free trial to test before you commit.