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Assertion (A): A… (Class 12 Accountancy SQP 2023-24, Q7)

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AccountancyCBSE Class 12 · Sample paper, session 2023-24 · 1 mark · Assertion-reason

CBSE Class 12 Accountancy sample paper 2023-24: question 7

From the official CBSE sample question paper for 2023-24, section A, question 7, for 1 mark. Try it first; the hints and our step-by-step solution are below.

Q7 · 1 mark · Assertion-reasonCompetency-basedAccounting for Share Capital

Assertion (A): A Company is Registered with an authorised Capital of 5,00,000 Equity Shares of ₹10 each of which 2,00,000 Equity shares were issued and subscribed. All the money had been called up except ₹2 per share which was declared as 'Reserve Capital'. The Share Capital reflected in balance sheet as 'Subscribed and Fully paid up' will be Zero.

Reason (R): Reserve Capital can be called up only at the time of winding up of the company.

  1. (A)Both Assertion (A) and Reason (R) are Correct and Reason (R) is the correct explanation of Assertion (A)
  2. (B)Both Assertion (A) and Reason (R) are Correct, but Reason (R) is not the correct explanation of Assertion (A)
  3. (C)Assertion (A) is incorrect, but Reason (R) is Correct.
  4. (D)Assertion (A) is correct, but Reason (R) is incorrect

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2023-24.

Hints

Open one hint at a time and try again before the next.

Hint 1

How much of each ₹ 10 share has been called?

Hint 2

When can reserve capital be called up?

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. ₹ 2 per share has been kept as Reserve Capital, so only ₹ 8 of each ₹ 10 share is called up. Every share is therefore "subscribed but not fully paid up", and the "subscribed and fully paid up" line is zero.

  2. Reserve capital is the part the company resolves to call only on winding up, which is exactly why those shares stay partly paid. The Reason explains the Assertion. Option (A).

    1 mark

Answer: (A) Both Assertion (A) and Reason (R) are Correct and Reason (R) is the correct explanation of Assertion (A)

Where the marks are

  • No share is fully paid because reserve capital is called only on winding up (1 mark)

Revise the chapter

Practise this chapterBoard-style questions from Accounting for Share Capital, one at a time, marked against the answer key and marking points.Back to the full paperSample paper 2023-24: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.