CUET Preparation Today
How is the diverse capital contributed by numerous shareholders accounted for? |
By creating individual capital accounts for each shareholder By distributing it as dividends to shareholders By merging capital contributions into a common account called Share Capital Account By investing it in various projects separately |
By merging capital contributions into a common account called Share Capital Account |
The correct answer is option 3- By merging capital contributions into a common account called Share Capital Account. When numerous shareholders contribute capital to a company, their individual capital contributions are combined and recorded in a common account known as the "Share Capital Account." A company, being an artificial person, cannot generate its own capital which has necessarily to be collected from several persons. These persons are known as shareholders and the amount contributed by them is called share capital. Since the number of shareholders is very very large, a separate capital account cannot be opened for each one of them. Hence, innumerable streams of capital contribution merge their identities in a common capital account called as ‘Share Capital Account’. |
