Lesson - Redemption of
Preference Shares - MCQs
1 Which of the following statements is false?
(a) A company can redeem its preference shares
(b) Preference shareholders are creditors of a company
(c) The part of the authorized capital which can be called up only in the event of
liquidation of a company is called reserve capital
(d) Capital redemption reserve can be utilized for issuing fully paid bonus shares
2. According to Section 78 of the Companies Act, the amount in the Securities
Premium A/c cannot be used for the purpose of
(a) Issue of fully paid bonus shares
(b) Writing off losses of the company
(c) Writing off preliminary expenses
(d) Writing off commission or discount on issue of shares
3. Which of the following can be utilized for redemption of preference shares?
(a) The proceeds of fresh issue of equity shares
(b) The proceeds of issue of debentures
(c) The proceeds of issue of fixed deposit
(d) The sale proceeds of investments
4. Which of the following statement is false?
(a) Capital redemption reserve cannot be used for writing off miscellaneous
expenses and losses
(b) Capital profit realized in cash can be used for payment of dividend
(c) Reserves created by revaluation of fixed assets are not permitted to be
capitalized
(d) Dividend is payable on the calls paid in advance by shareholders
5. Which of the following accounts can be transferred to Capital Redemption
Reserve Account?
(a) General Reserve Account
(b) Forfeited Shares Account
(c) Profit Prior to Incorporation
(d) Share Premium Account
6. Which of the following cannot be used for the purpose of creation of Capital
Redemption Reserve Account ?
(a) Profit and Loss Account (credit balance)
(b) General Reserve Account
(c) Dividend Equalization Reserve Account
(d) Unclaimed Dividends Account
7. Preference shares can be redeemed
(a) Out of profits only
(b) Out of proceeds of fresh issue only
(c) Out of capital profit only.
, Lesson - Redemption of
Preference Shares - MCQs
(d) Out of proceeds of fresh issue and or profit otherwise available for
distribution by way
and dividend
8. To the extent preference shares have been redeemed out of profits, amount
equal to the
face value of preference shares redeemed should be transferred to
(a) Development Rebate Reserve
(b) General Reserve
(c) Sinking Fund
(d) Capital Redemption Reserve
9. Which company can issue redeemable preference shares?
(a) A company limited by shares
(b) A company limited by guarantee not have share capital
(c) A company limited guarantee having share capital
(d) An unlimited company
10. A company can not issue __________
(a) redeemable cumulative preference shares
(b) redeemable non-cumulative preference shares
(c) redeemable participating preference shares
(d) irredeemable preference shares
11. Which does not from part of Divisible Profits?
(a) Workmen Compensation Fund
(b) Workmen Accident Fund
(c) Capital reserve arising from revaluation of assets
(d) None of these
12. Where redeemable preference shares are redeemed out of divisible profits,
an amount equivalents to the nominal value of the shares so redeemed must be
transferred out of divisible profits to:
(a) Profit & Loss Appropriation Account
(b) General Reserve
(c) Capital Reserve
(d) Capital Redemption Reserve Account
13. A transfer to Capital Redemption Reserve is required u/s 80 when
preference shares are
redeemed:
(a) by converting them into new preference shares
(b) by converting them into new equity shares
(c) out of divisible profits
(d) out of fresh issue of shares
14. When preference shares are redeemed out of divisible profits, which amount
is transferred to Capital Redemption Reserve u/s 80:
Preference Shares - MCQs
1 Which of the following statements is false?
(a) A company can redeem its preference shares
(b) Preference shareholders are creditors of a company
(c) The part of the authorized capital which can be called up only in the event of
liquidation of a company is called reserve capital
(d) Capital redemption reserve can be utilized for issuing fully paid bonus shares
2. According to Section 78 of the Companies Act, the amount in the Securities
Premium A/c cannot be used for the purpose of
(a) Issue of fully paid bonus shares
(b) Writing off losses of the company
(c) Writing off preliminary expenses
(d) Writing off commission or discount on issue of shares
3. Which of the following can be utilized for redemption of preference shares?
(a) The proceeds of fresh issue of equity shares
(b) The proceeds of issue of debentures
(c) The proceeds of issue of fixed deposit
(d) The sale proceeds of investments
4. Which of the following statement is false?
(a) Capital redemption reserve cannot be used for writing off miscellaneous
expenses and losses
(b) Capital profit realized in cash can be used for payment of dividend
(c) Reserves created by revaluation of fixed assets are not permitted to be
capitalized
(d) Dividend is payable on the calls paid in advance by shareholders
5. Which of the following accounts can be transferred to Capital Redemption
Reserve Account?
(a) General Reserve Account
(b) Forfeited Shares Account
(c) Profit Prior to Incorporation
(d) Share Premium Account
6. Which of the following cannot be used for the purpose of creation of Capital
Redemption Reserve Account ?
(a) Profit and Loss Account (credit balance)
(b) General Reserve Account
(c) Dividend Equalization Reserve Account
(d) Unclaimed Dividends Account
7. Preference shares can be redeemed
(a) Out of profits only
(b) Out of proceeds of fresh issue only
(c) Out of capital profit only.
, Lesson - Redemption of
Preference Shares - MCQs
(d) Out of proceeds of fresh issue and or profit otherwise available for
distribution by way
and dividend
8. To the extent preference shares have been redeemed out of profits, amount
equal to the
face value of preference shares redeemed should be transferred to
(a) Development Rebate Reserve
(b) General Reserve
(c) Sinking Fund
(d) Capital Redemption Reserve
9. Which company can issue redeemable preference shares?
(a) A company limited by shares
(b) A company limited by guarantee not have share capital
(c) A company limited guarantee having share capital
(d) An unlimited company
10. A company can not issue __________
(a) redeemable cumulative preference shares
(b) redeemable non-cumulative preference shares
(c) redeemable participating preference shares
(d) irredeemable preference shares
11. Which does not from part of Divisible Profits?
(a) Workmen Compensation Fund
(b) Workmen Accident Fund
(c) Capital reserve arising from revaluation of assets
(d) None of these
12. Where redeemable preference shares are redeemed out of divisible profits,
an amount equivalents to the nominal value of the shares so redeemed must be
transferred out of divisible profits to:
(a) Profit & Loss Appropriation Account
(b) General Reserve
(c) Capital Reserve
(d) Capital Redemption Reserve Account
13. A transfer to Capital Redemption Reserve is required u/s 80 when
preference shares are
redeemed:
(a) by converting them into new preference shares
(b) by converting them into new equity shares
(c) out of divisible profits
(d) out of fresh issue of shares
14. When preference shares are redeemed out of divisible profits, which amount
is transferred to Capital Redemption Reserve u/s 80:
