Day: May 1, 2020

The amount of the issued share capital of a company is. . . ?

Select ONE answer:

1. always equal to the amount of its authorised share capital.
2. equal to the amount of its issued preference share capital.
3. equal to the reserves of the company.
4. None of the above.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct – The amount of the issued share capital of a company may be less than, or equal to, the company’s authorised share capital.
2. Not correct – The total issued share capital of a company cannot equal its issued preference share capital, because every company must have at least two ordinary shares.
3. Not correct – There is no relationship between the amount of the issued share capital of a company and its reserves.
4. Correct – The issued share capital of a company is the total amount of share capital, both ordinary share capital and preference share capital, which it has actually sold to shareholders.

 

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