Types of Capital and Issue of Shares

Question 1

The maximum amount of shares a company is allowed to issue is called?

Accepted Answer

Authorised capital — Authorised (nominal) capital is the maximum amount of shares that may be issued.

Question 2

The part of authorised capital actually issued to shareholders is called?

Accepted Answer

Issued capital — Issued capital is the part of authorised capital that has been issued.

Question 3

The amount shareholders have actually paid for their shares is called?

Accepted Answer

Paid-up capital — Paid-up capital is the amount actually paid by shareholders.

Question 4

The correct order from largest is?

Accepted Answer

Authorised &ge; Issued &ge; Paid-up — Authorised capital is the ceiling, so authorised &ge; issued &ge; paid-up.

Question 5

The type of share that pays a fixed dividend is?

Accepted Answer

Preference shares — Preference shares pay a dividend at a fixed rate.

Question 6

The shareholders who usually have voting rights are holders of?

Accepted Answer

Ordinary shares — Ordinary shareholders have voting rights at company meetings.

Question 7

Melur Bhd. issues 200,000 ordinary shares @ RM1 fully paid in cash. The correct entry is?

Accepted Answer

Dr Bank RM200,000; Cr Ordinary Share Capital RM200,000 — Cash comes into the bank (debited) and ordinary share capital is credited RM200,000.

Question 8

Compared with ordinary shares, when dividends are paid, preference shares are?

Accepted Answer

Paid before ordinary shares — Preference shares rank ahead of ordinary shares for dividends.

Question 9

A company has authorised capital of RM800,000 and has issued shares of RM500,000 fully paid. What is the paid-up capital?

Accepted Answer

RM500,000 — Paid-up capital = amount paid on the issued shares = RM500,000.

Question 10

Which of the following receives a variable dividend depending on the company's profit?

Accepted Answer

Ordinary shares — Ordinary shares receive a variable dividend depending on profit.