Chapter-wise Marks Distribution
S. No. Chapter20192020202120222023Average DDJDJDJ 1Introduction to Financial Accounting 43553354.0 2Introduction to Corporate Accounting 1653323 3.28 3Issue of Shares8-12108446.57 4Issue of Right & Bonus Shares--4-111.0 5Redemption of Preference Shares2-4--11.0 6Buy Back of Shares 3155423 3.28 7Issue & Redemption of Debentures665106476.28 8Underwriting of Shares & Debentures1- 21112 1.14 9Accounting for Share Based Payments - 221232 1.71 10Financial Statements Interpretation 2625345 3.85 11Consolidation of Accounts 53423474.0 12Corporate Financial Reporting 97748135 7.57 13Cash Flow Statement 7456656 5.57 14Overview of Accounting Standards 4725364 4.42 15National & International Accounting Authorities 4622513 3.28 16Adoption, Convergence & Interpretation of IFRS & Accounting Standards in India 3814574 4.57 17Overview of Cost 4644456 4.71 18Cost Accounting Records & Cost Audit under the Companies Act, 2013 2434512 3.00 19Budgetary Control 6657645 5.57 20Ratio Analysis5210 5676 5.85
I-5
Note : J - June; D - December.
S. No. Chapter20192020202120222023Average DDJDJDJ 21Fund Flow Statement 1 - 30.57 22Management Reporting21- 11111.0 23Marginal Costing & Transfer Pricing 574741056.0 24Activity Based Costing & Transfer Pricing 3312132 2.14 25Valuation of Goodwill & Shares 4422125 2.85 26Valuation, Principles & Framework 4321516 3.14 27Methods of Valuation 6523622 3.71 Total 100100100100100100100
I-6
CHAPTER-WISE MARKS DISTRIBUTION
Chapter-wise Comparison with Study Material
Chapter No. Name of ChapterStudy Material 1 Introduction to Financial AccountingChapter 1 2 Introduction to Corporate AccountingChapters 2 & 5 3 Issue of SharesChapter 3 4 Issue of Right & Bonus SharesChapter 3 5 Redemption of Preference SharesChapter 3 6 Buy Back of SharesChapter 3 7 Issue & Redemption of DebenturesChapter 4 8 Underwriting of Shares & DebenturesChapter 3 9 Accounting for Share Based Payments Chapter 21 10 Financial Statements InterpretationChapters 5 & 6 11 Consolidation of AccountsChapter 7 12 Corporate Financial ReportingChapter 8 13 Cash Flow StatementChapter 9 14 Overview of Accounting StandardsChapter 10 15 National & International Accounting AuthoritiesChapter 11 16 Adoption, Convergence & Interpretation of IFRS & Accounting Standards in India Chapter 12 17 Overview of Cost Chapter 13 18 Cost Accounting Records & Cost Audit under the Companies Act, 2013 Chapter 14 19 Budgetary ControlChapter 15 20 Ratio AnalysisChapter 16 21 Fund Flow Statement Chapter 9 22 Management ReportingChapter 17 23 Marginal Costing Chapter 18 24 Activity Based Costing & Transfer PricingChapter 18
I-7
Chapter No. Name of ChapterStudy Material 25 Valuation of Goodwill & Shares Chapter 20 26 Valuation, Principles & FrameworkChapter 19 27 Methods of ValuationChapter 22 I-8 CHAPTER-WISE COMPARISON
STUDY MATERIAL
WITH
Contents Chapter-wise Marks Distribution I-5 Chapter-wise Comparison with Study Material I-7 PART A CORPORATE ACCOUNTING Chapter 1 INTRODUCTION TO FINANCIAL ACCOUNTING 1.3 Chapter 2 INTRODUCTION TO CORPORATE ACCOUNTING 2.1 Chapter 3 ACCOUNTING FOR ISSUE OF SHARES 3.1 Chapter 4 ISSUE OF RIGHT & BONUS SHARES 4.1 Chapter 5 REDEMPTION OF PREFERENCE SHARES 5.1 Chapter 6 BUY BACK OF SHARES 6.1 Chapter 7 ISSUE & REDEMPTION OF DEBENTURES 7.1 PAGE I-9
Chapter 8 UNDERWRITING OF SHARES & DEBENTURES 8.1 Chapter 9 ACCOUNTING FOR SHARE BASED PAYMENTS (ESOS & ESOP) 9.1 Chapter 10 FINANCIAL STATEMENTS INTERPRETATION 10.1 Chapter 11 CONSOLIDATION OF ACCOUNTS 11.1 Chapter 12 CORPORATE FINANCIAL REPORTING 12.1 Chapter 13 CASH FLOW STATEMENT 13.1 Chapter 14 OVERVIEW OF ACCOUNTING STANDARDS 14.1 Chapter 15 NATIONAL & INTERNATIONAL ACCOUNTING AUTHORITIES 15.1 Chapter 16 ADOPTION, CONVERGENCE & INTERPRETATION OF IFRS & ACCOUNTING STANDARDS IN INDIA 16.1 PART B MANAGEMENT ACCOUNTING Chapter 17 OVERVIEW OF COST 17.3 Chapter 18 COST ACCOUNTING RECORDS & COST AUDIT UNDER THE COMPANIES ACT, 2013 18.1 Chapter 19 BUDGETARY CONTROL 19.1 Chapter 20 RATIO ANALYSIS 20.1 PAGE I-10 CONTENTS
Chapter 21 FUND FLOW STATEMENT 21.1 Chapter 22 MANAGEMENT REPORTING 22.1 Chapter 23 MARGINAL COSTING 23.1 Chapter 24 ACTIVITY BASED COSTING (ABC) & TRANSFER PRICING 24.1 Chapter 25 VALUATION OF GOODWILL & SHARES 25.1 Chapter 26 VALUATION, PRINCIPLES & FRAMEWORK 26.1 Chapter 27 METHODS OF VALUATION 27.1 Solved Paper : June 2023 (Suggested Answers) P.1 PAGE CONTENTS I-11
6
CHAPTER
1. Provisions relating to buy back of securities are contained in ______ of the Companies Act, 2013.
(A) Section 77
(B)Section 77A
(C)Section 68
(D)Section 63
2. A company may purchase its own shares or other specified securities out of -
A.Free reserves
B.Securities premium account
C.Proceeds of issue of any shares
D.Proceeds of issue of specified securities.
Select the correct answer from the options given below.
(A)A and C only
(B)A, B and C only
(C)A, C and D only
(D)A or B or C or D
3. Section 68 of the Companies Act, 2013 provides that no buy-back of any kind of shares or other specified securities shall be made out of the -
(A)Securities premium balance as it stood before buy-back.
(B)Proceeds of an earlier issue of the same kind of shares or same kind of other specified securities.
(C)General reserve in excess of 15% balance as per latest audited balance sheet.
(D)Proceeds of issue of specified securities.
4. Provisions of the Section 68 relating to buy-back of shares are applicable to -
(A)Private companies
(B)Public companies
(C)Listed companies
(D)All of the above
5. No company shall purchase its own shares or other specified securities, unless buy-back is authorized by its -
(A)Memorandum of Association
(B)Registrar of Companies
(C)Shareholders agreement
(D)Article of Association
6. Maximum permissible buy-back under the Companies Act, 2013 is -
(A)10% of paid-up capital with Board resolution.
(B)25% of paid-up capital with Board resolution.
6.1
MCQ MCQs ON THEORY
(C) 25% of the aggregate of paid-up capital and free reserves of the company with special resolution of shareholders.
(D) 25% of the aggregate of paid-up capital and free reserves of the company with ordinary resolution of shareholders.
7. Which of the following is correct journal entry for the ‘Amount due on buy back of shares’?
(A)Equity Shareholders A/cDr.
To Equity Share Capital A/c
(B)Equity Shareholders A/cDr.
To Equity Share Capital A/c
To Reserves/Securities
Premium A/c
(C)Equity Share Capital A/cDr. Reserves/Securities
Premium A/c Dr.
To Equity Shareholders A/c
(D)Equity Shareholders A/cDr.
To Bank A/c
8. For buy-back up to _______ of the company Board resolution is sufficient.
(A) 10% of paid-up capital
(B) 10% of free reserves
(C) 10% of paid-up capital or free reserves
(D) 10% of paid-up capital and free reserves
9. Buy-back of equity shares in any financial year should not exceed -
(A) 10% of net worth
(B) 25% of the aggregate of paid-up capital and free reserves of the company
(C) 25% of the paid-up equity capital
(D) 25% of the aggregate of paid-up equity capital and preference capital
10. As per Section 68 of the Companies Act, 2013, post buy-back debt equity ratio should not exceed -
(A) 1
(B) 1.5
(C) 2
(D) 3
11. For the purpose of calculating debt equity ratio which of the following debts are considered -
(A) Secured debts
(B) Unsecured debts
(C) Current liabilities
(D) All of the above
12. Companies are allowed to buy-back shares which are -
(A) Partly paid-up
(B) Fully paid-up
(C) Partly paid-up or fully paid-up at the option of company
(D) Fully paid-up and partly paid-up with the permission of Central Government
13. The buy-back of the shares or other specified securities listed on any recognized stock exchange is in accordance with the -
(A) SEBI (Buy-back of Securities) Regulations, 2018
(B) SEBI (Buy-back of Securities) Regulations, 2014
(C) SEBI (Buy-back of Securities) Regulations, 1992
(D) SEBI (Buy-back of Securities) Regulations, 1994
6.2 PART A : CORPORATE ACCOUNTING
14. No offer of buy-back shall be made within a period of ______ reckoned from the date of the closure of the preceding offer of buy-back
(A) 6 months
(B) 1 year
(C) 2 years
(D) 10 months
15. The notice of the meeting at which the special resolution is proposed to be passed relating to buy-back of shares shall be accompanied by an explanatory statement stating -
(A) Full and complete disclosure of all material facts
(B) Analysis of debt equity
(C) Gross profit ratio before buy-back
(D) Chairman’s view on buy-back
16. Which of the following method of buy back is allowed under the Companies Act, 2013?
(I) Buy-back from the existing shareholders or security holders on a proportionate basis.
(II) Buy-back from the promoters of the company only on selective basis.
(III) Buy-back from the open market. Select the correct answer from the options given below.
(A) (I) only
(B) (I) and (II) only
(C) (I) and (III) only
(D) (I), (II) and (III)
17. Where a company proposes to buyback its own shares or other specified securities, it shall, before making such buy-back, file with the ROC and
the SEBI, a declaration of solvency signed by -
(A) at least 2 directors of the company, one of whom shall be the managing director.
(B) at least 2 directors, managing director and Chief Financial Officer, if any.
(C) at least 2 directors of the company and Company Secretary, if any.
(D) at least 3 directors of the company, one of whom shall be the managing director.
18. A company used balance of ‘General Reserve’ and ‘P & L A/c’ for buy-back of equity shares. Which of the following is correct journal entry for this transaction?
(A)Capital Redemption Reserve A/cDr.
To General Reserve A/c
To Profit & Loss A/c
(B)General Reserve A/cDr. Profit & Loss A/cDr.
To Equity Shareholders A/c
(C)General Reserve A/cDr. Profit & Loss A/c
To Capital Redemption Reserve A/c
(D)Equity Shareholders A/cDr.
To General Reserve A/c
To Profit & Loss A/c
19. Declaration of solvency in relation to buy back of shares has to be filed in -
(A) Form SH-6
(B) Form SH-9
(C) Form SH-4
(D) Form SH-8
20. As per Section 68(6) of the Companies Act, 2013, declaration
CH. 6 : BUY BACK OF SHARES 6.3
of solvency should be verified by an affidavit to the effect that the Board of Directors of the company has made a full inquiry into the affairs of the company as a result of which they have formed an opinion that it is capable of meeting its liabilities and will not be rendered insolvent within a period of _____ from the date of declaration adopted by the Board.
(A) 6 months
(B) 1 year
(C) 2 years
(D) 10 months
21. Where a company buys-back its own shares or other specified securities, it shall extinguish and physically destroy the shares or securities so bought back within ______ of the last date of completion of buy-back.
(A) 3 days
(B) 8 days
(C) 7 days
(D) 9 days
22. Where a company completes a buyback of its shares or other specified securities, it shall not make a further issue of the same kind of shares or other securities including allotment of new shares u/s 62(1)(a) [i.e. right issue] or other specified securities within a period of -
(A) 6 months
(B) 1 year
(C) 2 years
(D) 10 months
23. Which of the following is allowed within next 6 months after the buyback of share?
(A) Bonus issue
(B) Conversion of warrants
(C) Stock option schemes
(D) All of the above
24. Which of the following is allowed within next 6 months after the buyback of share?
(A) Stock option schemes
(B) Sweats equity
(C) Conversion of preference shares or debentures into equity shares
(D) All of the above
25. Which of the following method of buy-back is allowed under the Companies Act, 2013?
(I) Buy-back by way of purchasing the securities issued to employees of the company pursuant to a scheme of stock option.
(II) Buy-back by way of purchasing the securities issued to employees of the company pursuant to a scheme of sweat equity.
Select the correct answer from the options given below:
(A) (I) only
(B) (II) only
(C) Both (I) and (II)
(D) Neither (I) nor (II)
MCQ PRACTICAL MCQs
26. Paid-up equity shares capital of ABC Ltd. is ` 50,00,000 having face value of ` 10 each fully paid-up. Other details:
General Reserve = ` 15,00,000
Capital Redemption Reserve = ` 4,00,000
6.4 PART A : CORPORATE ACCOUNTING
PRACTICAL
Profit & Loss Account = ` 1,00,000
Statutory reserve = ` 6,40,000
Securities Premium = ` 1,00,000
The Board of Directors passed resolution in Board meeting to buyback maximum number of shares as allowed by law. Maximum No. of shares that can be brought back = ?
(A) 55,000 shares
(B) 67,000 shares
(C) 1,25,000 shares
(D) 78,000 shares
27. N Ltd. had 90,000 equity shares of ` 100 each, fully paid up. The company decided to buy-back 10% shares at par by the issue of sufficient number of preference shares. N Ltd. does not have any reserves.
How much preference shares are required to be issued if new preference shares are to be issued at ` 10 each?
(A) 9,00,000 shares
(B) 90,000 shares
(C) 1,00,000 shares
(D) 1,20,000 shares
28. S Ltd. decided to buy-back 2,000 equity shares of ` 100 each at a premium of 10%. For the purpose of redemption, the company issued 15,000 10% Preference shares of ` 10 each at a premium of 20%. Company has sufficient balance in Profit & Loss A/c. At the time of buy-back shares, the amount to be transferred by the company to the Capital Redemption Reserve Account = ?
(A) ` 20,000
(B) ` 50,000
(C) ` 1,50,000
(D) ` 2,00,000
29. During the year 2018-2019, T Ltd. buy-back 20,000 equity shares of ` 100 each at a premium of 5%. During the year 2018-2019, as the company did not have sufficient cash resources to buy back equity shares, it issued 1,00,000, 12% Preference shares of ` 10 each at a premium of 15%. The company has sufficient balance in general reserve. At the time of buy-back equity shares, the amount to be transferred to capital redemption reserve = ?
(A) ` 10,00,000
(B) ` 9,50,000
(C) ` 12,00,000
(D) ` 15,00,000
30. Equity shares amounting to ` 2,00,000 are brought-back at a premium of 5%, by issue of preference shares amounting to ` 1,00,000 at a premium of 10%. The amount to be transferred to capital redemption reserve = ?
(A) ` 1,00,000
(B) ` 90,000
(C) ` 1,50,000
(D) ` 50,000
31. ABC Ltd. has paid-up equity capital of 10,00,000 equity shares of ` 10 each fully paid-up. Position of reserves is as follows:
General Reserve = ` 30,00,000
Profit & Loss Account = ` 2,00,000
Securities Premium = ` 2,00,000 Company decided to buy-back 2,00,000 equity shares of ` 10 each at 25% premium. For this purpose, the company sold the entire investments at ` 12,00,000 (book value ` 10,00,000) and made a fresh issue of 10% preference shares of ` 100 each to the extent
CH. 6 : BUY BACK OF SHARES 6.5
minimum after utilizing the securities premium account and half of general reserve. How much preference shares must be issued by the company so that provisions of the Companies Act, 2013 get complied?
(A) 20,000 preference shares
(B) 40,000 preference shares
(C) 1,000 preference shares
(D) 4,000 preference shares
32. Following are the extract of balance sheet of Light Co. Ltd.
Equity Shares of ` 10 each 10,00,000
Securities Premium2,40,000
Reserves7,50,000
Profit & Loss Account2,80,000
Bank9,10,000
Non-Trading Investments4,20,000 Company bought-back 15,000 shares at ` 40 each. The transaction in respect of buy-back was financed by sale of 2/3rd of non-trade investment for ` 5,90,000. Amount to be transferred to capital redemption reserve = ?
(A) ` 6,00,000
(B) ` 1,00,000
(C) ` 4,50,000
(D) ` 1,50,000
33. Following are the extract of balance sheet of Tube Ltd. `
Equity Shares of ` 10 each 20,00,000
Securities Premium4,80,000
Reserves 15,00,000
Profit & Loss Account5,60,000
Bank18,20,000
Non-Trading Investments8,40,000 Company bought back 30,000 shares at ` 40 each. The transaction in respect of buy-back was financed by sale of 2/3rd of non-trade investment for ` 11,80,000.
Bank balance after buy-back will be -
(A) ` 12,00,000
(B) ` 16,00,000
(C) ` 14,50,000
(D) ` 18,00,000
34. Following information is available from the audited balance sheet of TH Ltd.:
(` in lakhs)
Equity Share Capital 30,000
(3,000 lakh Shares of ` 10 each)
Securities Premium A/c3,000
General Reserve10,000
Secured Loans40,000
Unsecured Loans22,000 Compute the maximum limit up to which buy-back is permitted in the financial year 2018-2019.
(A) 800 lakh shares
(B) 600 lakh shares
(C) 500 lakh shares
(D) 400 lakh shares
35. X Ltd. proposes to buy-back ` 6,00,000 equity capital at 50% premium by issuing 2,000 14% preference shares of ` 100 each at 20% premium. It has balance in Securities Premium, General Reserve and P & L A/c of ` 3,50,000; ` 9,30,000 & ` 48,000 respectively. For this purpose, it sold
6.6 PART A : CORPORATE ACCOUNTING
`
all of its investments of ` 1,48,000 for ` 1,50,000. The company wants to keep balance of 6,00,000 in general reserve. What are the balances of (i) Securities Premium A/c and (ii) Capital Redemption Reserve A/c after giving effect to above transactions?
PAST EXAMINATION MCQ PAST EXAMINATION MCQs
36. Dec 2019: Rule 17 of the Companies (Share Capital & Debenture) Rule, 2014, is related to:
(A) Issue of right shares
(B) Buy-back of shares or other securities
(C) Issue of sweat equity shares
(D) Employee stock option plan
37. Dec 2019: In case of buy-back of shares, passing of the special resolution is not required if:
(A) the buy-back is 10% or less of the total paid-up equity capital of the company
(B) the buy-back is 25% or less of the total paid-up equity capital of the company
(C) the buy-back is 10% or less of the total paid-up equity capital and free reserves of the company
(D) the buy-back is 25% or less of the total paid-up equity capital and free reserves of the company
38. Dec 2019: Every buy-back shall be completed within a period of ............. from the date of the resolution or special resolution, as the case may be, passed by the Board.
(A) One month
(B) Three months
(C) Six months
(D) One year
39. Dec 2020: The Escrow account under Regulation 9(xi) of SEBI (Buyback of Securities) Regulations, 2018 does not include:
(A) Cash deposited with a scheduled commercial bank
(B) Bank guarantee in favour of the merchant banker
(C) Deposit of acceptable securities with appropriate margin, with the merchant banker
(D) Deposits of acceptable securities with appropriate margin, with the company
40. June 2021: As per Section 68 of the Companies Act, 2013, post buy-back, debt equity ratio should not exceed ..............
(A) 1
(B) 1.5
(C) 2
(D) 3
41. June 2021: Where a company buy-back own shares or other specified securities, it shall extinguish and physically destroy the shares or securities so brought back within ............... of the last date of completion of buy-back?
(A) 3 days
(B) 8 days
(C) 7 days
(D) 9 days
CH. 6 : BUY BACK OF SHARES 6.7
(i)(ii) (A) ` 90,000 ` 4,00,000
` 4,00,000 ` 90,000 (C) ` 70,000 ` 4,00,000 (D) ` 4,00,000 ` 70,000
(B)
42. June 2021: Declaration of solvency in relation to buy-back of shares has to be filed in .............
(A) Form SH-6
(B) Form SH-9
(C) Form SH-4
(D) Form SH-8
43. June 2021: Paid-up equity shares capital of Novel Ltd. is ` 50,00,000 having face value of ` 10 each fully paid-up. Other details:
General Reserve = ` 15,00,000
Capital Redemption Reserve = ` 4,00,000
Profit & Loss Account = ` 1,00,000
Statutory Reserve = ` 6,40,000
Securities Premium = ` 1,00,000
The board of directors passed resolution in board meeting to buy back maximum number of shares as allowed by law. What is the maximum no. of shares that can be bought back?
(A) 55,000 shares
(B) 67,000 shares
(C) 1,25,000 shares
(D) 78,000 shares
44. June 2021: Negi Ltd. had 90,000 equity shares of ` 100 each, fully paid-up. The company decided to buy-back 10% shares at par by the issue of sufficient number of preference shares. Company does not have any reserves. How much preference shares are required to be issued, if new preference shares are to be issued at ` 10 each?
(A) 9,00,000 shares
(B) 90,000 shares
(C) 1,00,000 shares
(D) 1,20,000 shares
45. Dec. 2021: As per Section 68(4) of the Companies Act, 2013, every buyback shall be completed within a period of ............. from the date of passing of the special resolution, or as the case may be, the resolution passed by the Board of directors.
(A) 6 months
(B) One year
(C) Two years
(D) 5 years
46. Dec. 2021: According to section 68(1) of the Companies Act, 2013, a company cannot purchase its own shares or other specified securities (referred to as buy-back) out of:
(A) Free reserves
(B) Securities premium account
(C) The proceeds of the issue of any shares or other specified securities
(D) The proceeds of an earlier issue of the same kind of shares or same kind of other specified securities
47. Dec. 2021: The escrow amount shall be payable in the following manner:
(i) if the consideration payable does not exceed ` 100 Crore; 25 per cent of the consideration payable;
(
ii) if the consideration payable exceeds ` 100 Crore; 25 per cent up to ` 100 Crore and 10 per cent thereafter;
(
iii) if the consideration payable does not exceed ` 10 Crore; 25 per cent of the consideration payable;
(
iv) if the consideration payable exceeds ` 100 Crore; 5 per cent up to ` 100 Crore and 2.5 per cent thereafter
Select correct answer from the options given below.
6.8 PART A : CORPORATE ACCOUNTING
(A) (i)
(B) (i) and (ii)
(C) (i), (ii) and (iii)
(D) (i), (ii), (iii) and (iv)
48. Dec. 2021: In case of buy-back of own shares, a company shall make a public announcement within two working days from the date of special resolution/Board of directors resolution in:
(A) at least one English National Daily, one Hindi National Daily and two Regional language daily
(B) at least one English National Daily, one Hindi National Daily and one Regional language daily
(C) at least one English National Daily, two Hindi National Daily and one Regional language daily
(D) at least two English National Daily, one Hindi National Daily and one Regional language daily
49. Dec. 2021: A company after the completion of the buy-back under this sections, shall file with the Registrar a return in ...................
(A) Form No. SH. 9
(B) Form No. SH. 10
(C) Form No. SH. 11
(D) Form No. SH. 12
50. June 2022: As per Section 68(2) of the Companies Act, 2013, post buy-back debt-equity ratio should be ................
(A) 1 : 1
(B) 1.5 : 1
(C) 2 : 1
(D) 2.5 : 1
51. June 2022: Every buy-back shall be completed within a period of ........ from the date of the resolution or
special resolution, as the case may be, passed by the Board of Directors.
(A) Three months
(B) Six months
(C) One year
(D) Two years
52. June 2022: In case of buy-back of shares, passing of special resolution by a company is not required if:
(A) the buy-back is 10% or less of the total paid-up equity share capital
(B) the buy-back is 10% or less of the total paid-up equity share capital and free reserves
(C) the buy-back is 25% or less of the total paid-up equity share capital
(D) the buy-back is 25% or less of the total paid-up equity share capital and free reserves
53. June 2022: The Escrow account under Regulation 9(xi) of SEBI (BuyBack of Securities) Regulations, 2018, does not include:
(A) Cash deposited with a scheduled commercial bank
(B) Bank guarantee in favour of the merchant banker
(C) Deposit of acceptable securities with appropriate margin, with the merchant banker
(D) Deposit of acceptable securities with appropriate margin, with a scheduled commercial bank
54. Dec. 2022: A company planned to buy-back its own shares for a consideration of ` 200 Crore. For this, as per the SEBI (Buy-Back of Securities) Regulations, 2018, the escrow amount that should be payable is:
(A) ` 200 Crore
(B) ` 50 Crore
CH. 6 : BUY BACK OF SHARES 6.9
(C) ` 35 Crore
(D) ` 25 Crore
55. Dec. 2022: The minimum time interval between two successive buyback offers is .............. from the closure of the preceding offer of buy-back.
(A) 6 months
(B) 12 months
(C) 18 months
(D) 24 months
26. Where buy-back is up to 10% of paid-up capital and free reserves of the company Board resolution is sufficient.
27. Amount due to equity shareholders on buy-back = 90,000 × 100 × 10% = 9,00,000
(-) Out of proceeds of fresh issue preference shares (15,000 × 12) (1,80,000) 20,000
(-) Out of P & L A/c (20,000) Nil
Note 1: It is noted that in case of redemption of preference shares securities premium balance cannot be utilized for repayment of ‘preference share capital’ amount. However, this condition is not applicable for buy-back of equity shares because as per Section 68 of the Companies Act, 2013, Securities Premium has to be treated as ‘free reserve’. Thus, securities premium collected on issue of shares can be utilized in repayment of Equity Capital Amount.
6.10 PART A : CORPORATE ACCOUNTING
1. (C) 2. (D) 3. (B) 4. (D) 5. (D) 6. (C) 7. (C) 8. (D) 9. (C) 10. (C) 11. (D) 12. (B) 13. (A) 14. (B) 15. (A) 16. (C) 17. (A) 18. (C) 19. (B) 20. (B) 21. (C) 22. (A) 23. (D) 24. (D) 25. (C) 26. (B) 27. (B) 28. (A) 29. (B) 30. (A) 31. (A) 32. (D) 33. (D) 34. (B) 35. (C) 36. (B) 37. (C) 38. (D) 39. (D) 40. (C) 41. (C) 42. (B) 43. (B) 44. (B) 45. (B) 46. (D) 47. (B) 48. (B) 49. (C) 50. (C) 51. (C) 52. (A) 53. (D) 54. (C) 55. (B) HINTS FOR IMPORTANT PRACTICAL MCQ HINTS FOR IMPORTANT PRACTICAL MCQs
Answers
(50,00,000
15,00,000
1,00,000 + 1,00,000)
10% = 6,70,000 6,70,000/10
+
+
×
= 67,000
No. of shares to be issued
9,00,000 = 90,000 10 28. Equity share capital to be brought-back (2,000 × 100)2,00,000
=
Note 2: Total amount collected on issue of preference shares is ` 1,80,000 whereas amount payable on buy-back of shares is ` 2,00,000. Thus, shortage of ` 20,000 will be taken from profit & loss account because Section 68 of the Companies Act, 2013 allows buy-back - (i) Out of proceeds of fresh issue of securities (ii) Free Reserve and (iii) Securities premium.
Note 3: As per Section 69, where a company purchases its own shares out of free reserves or securities premium account, a sum equal to the nominal value of the shares so purchased shall be transferred to the Capital Redemption Reserve (CRR) account. Since in given case amount of ` 20,000 utilized from profit & loss account a sum of ` 20,000 must be transferred to Capital redemption amount.
Note 4: It is not possible to give such detailed explanation for each MCQ, so students are advised to apply all the provisions of the Section 68 & Section 69 before arriving any conclusion as to final answer of any MCQ. However, relevant calculations are given in short for other MCQs in this chapter.
CH. 6 : BUY BACK OF SHARES 6.11
29. Capital Buy-back Premium Equity share capital to be bought-back 20,00,0001,00,000 (-) Out of proceeds of fresh issue preference shares (10,00,000)(-) Out of securities premium on issue of pref. shares (50,000)(1,00,000) (-) Out of P & L A/c (9,50,000)NilNil 30. Capital Buy back Premium Equity share capital to be bought-back 2,00,00010,000 (-) Out of proceeds of fresh issue preference shares (1,00,000)(-) Out of securities premium on issue of pref. shares -(10,000) (-) Out of P & L A/c (1,00,000)NilNil 32. 15,000 × 10 = 1,50,000 33. Opening balance of cash & bank18,20,000 (+) Amount received on sale of investment 11,80,000 (-) Amount payable to equity shareholder on buy-back(12,00,000) Closing balance of cash & bank18,00,000
34. (1) The buy-back of equity shares in any financial year should not exceed 25% of its total paid-up equity capital in that financial year. [` 30,000 × 25% = ` 7,500]
(2) 25% of the aggregate of paid-up capital and free reserves of the company. [(30,000 + 3,000 + 10,000) × 25% = ` 10,750]
(3) The ratio of the aggregate of secured and unsecured debts owed by the company after buy-back is not more than twice the paid-up capital and its free reserves.
Let the amount of buy-back be ‘x ’
Secured + Unsecured Debts 2
Paid-up Capital + Free Reserves
Let the amount to be buy-back be ‘x’.
62.000 = 2
30,000 - x + (3,000 + 10,000 - x) 62.000 = 2
Since, out of the above three calculations, minimum amount is 6,000; hence maximum face value of shares that can be bought is ` 6,000 lakhs i.e. 600 lakh shares. (6,000/10 = 600)
6.12 PART A : CORPORATE
ACCOUNTING
62.000=
- 24,000=
43,000 - 2x
86,000 - 4x
- 4x x = 6,000
Free ReservesCapital Profits General Reserve P & LSecurities Premium CRR Balance9,30,00048,000Balance3,50,0004,00,000 Profit on sale investment2,000On issue of Pref. shares 40,000 50,000 Premium on buyback (3,00,000) Buy back of capital(3,30,000)(50,000) Buy back of capital (20,000) 6,00,000-70,000 Equity capital to be bought back6,00,000Premium on buy-back3,00,000 Out of proceeds of fresh issue (2,00,000) Out of securities premium(3,00,000) 4,00,000-
35.
Free ReservesCapital Profits
43. Where buy-back is up to 10% of paid-up capital and free reserves of the company Board resolution is sufficient.
(50,00,000 + 15,00,000 + 1,00,000 + 1,00,000) × 10% = 6,70,000
6,60,000/10 = 67,000 equity shares
44.
Amount to equity shareholders on buy-back = 90,000 × 100 × 10% = 9,00,000
No. of shares to be issued =Amount payable to equity shareholder = 9,00,000 = 90,000
Face value per share10
54. As per Regulation 9(11) of the SEBI (Buy-Back of Securities) Regulations, 2018, the escrow amount shall be payable in the following manner:
If the consideration payable does not exceed ` 100 Crore 25% of the consideration payable
If the consideration payable exceed ` 100 Crore25% up to ` 100 Crore and 10% thereafter.
In given case, consideration for buy-back is ` 200 Crore and hence amount to be deposited in escrow account will be ` 35 Crore. [(` 100 Crore × 25%) + (` 100 Crore ×10%)]
CH. 6 : BUY BACK OF SHARES 6.13
of general reserve (3,30,000) 70,000 Out of P & L(50,000) 20,000 Out of securities premium(20,000) Nil
Out
Corporate & Management Accounting (CMA) | CRACKER
AUTHOR : N.S. ZAD
PUBLISHER : TAXMANN
DATE OF PUBLICATION : JUNE 2023
EDITION : 8TH EDITION
ISBN NO : 9789357781343
NO. OF PAGES : 468
BINDING TYPE : PAPERBACK
Description
This book is prepared exclusively for the Executive Level of Company Secretary Examination requirement. It covers the questions (topic-wise) & detailed answers strictly as per the syllabus of ICSI.
The Present Publication is the 8th Edition for CS-Executive | Old Syllabus | Dec. 2023 Exam. This book is authored by CS N.S. Zad with the following noteworthy features:
u [Coverage] of this book includes
Fully Solved Questions of Past Exams, including:
Solved Paper – June 2023 | Suggested Answers
u [Topic-wise] arrangement of past exam questions
u [Practical MCQs] with Hints
u [Most Amended & Updated] Covers the latest applicable provisions and amendments as per the Companies Act, 2013
u [Marks Distribution] Chapter-wise Marks Distribution from December 2019 onwards
u [ICSI Study Material] comparison
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