Which of the following statements are correct in respect of share cap…

Which of the following statements are correct in respect of share capital?

A. Share application money received in excess is adjusted towards allotment.
B. Calls in advance is shown under share capital
C. Securities premium can be used to issue fully paid bonus shares
D. Share forfeiture account is a capital gain

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → A, C and D only

Each statement is checked against the accounting treatment of share capital.

A. Share application money received in excess is adjusted towards allotment. Correct. When an issue is oversubscribed and shares are allotted pro rata, the extra money an applicant sent with his application is not returned at once but used to pay his allotment money; only what is left over after that is refunded.

B. Calls in advance is shown under share capital Incorrect. Calls in advance is money a shareholder pays before the company has asked for it. Until the call is made, the company owes that money back to him, so it is a liability, not share capital.

C. Securities premium can be used to issue fully paid bonus shares Correct. Issuing fully paid bonus shares is one of the purposes for which Securities Premium may be used under the Companies Act, 2013.

D. Share forfeiture account is a capital gain Correct. The amount forfeited is kept by the company without any shares being issued against it, so the balance left after reissue is a capital profit and is transferred to Capital Reserve.

NCERT (2026-27 edition):
Over Subscription – “… Second Alternative : When the directors opt to make a proportionate allotment to all applicants (called ‘pro-rata’ allotment), the excess application money received is normally adjusted towards the amount due on allotment.”

NCERT (2026-27 edition):
Calls in Advance – “… The balance in ‘Calls in Advance’ account is shown as a separate item under the title Equity and Liabilities in the company’s balance sheet under the head ‘current liabilities’, as sub-head ‘others current liabilities’. It is not added to the amount of paid-up capital.”

NCERT (2026-27 edition):
Issue of Shares at a Premium – “… When the issue of shares is at a premium, the amount of premium may technically be called at any stage of the issue of shares. … The premium amount is credited to a separate account called ‘Securities Premium Account’ … It can be used only for the following five purposes: to issue fully paid bonus shares to the extent not exceeding unissued share capital of the company; to write-off preliminary expenses of the company; to write-off the expenses of, or commission paid, or discount allowed on any securities of the company; and to pay premium on the redemption of preference shares or debentures of the company.”

NCERT (2026-27 edition):
Reissue of Forfeited Shares – “The directors can either cancel or re-issue the forefeited shares. … The balance, if any, left in the Share-Forfeited Account relating to reissued Shares, should be treated as capital profit and transferred to Capital Reserve Account.”