Company Accounts – Complete JAIIB Notes 2026: Share Capital, Issue of Shares, Schedule III, Ind AS Impact + 50 MCQs

📅 Updated: September 2026 • 27 min read

1 Definition and Types of Companies

🏢

Definition — Section 2(20), Companies Act, 2013

A Company is an artificial legal person, incorporated under the Companies Act, having perpetual succession, a separate legal entity distinct from its members, limited liability, and freely transferable shares (in the case of a public company).

Private Company

Min. 2, max 200 members; restricts share transfer; needs min. 2 directors.

Public Company

Min. 7 members, no upper limit; no restriction on share transfer; min. 3 directors.

One Person Company (OPC)

A single member forms the company — a private company variant.

Government Company

Central/State Government holds ≥ 51% of paid-up share capital.

Section 8 Company

Formed for charitable/non-profit objects; profits are reinvested, not distributed.

Holding & Subsidiary Company

A holding company controls the composition of the Board, or holds > 50% voting power, in its subsidiary.

2 Partnership vs LLP vs Company

Feature	Partnership	LLP	Company
Governing Law	Indian Partnership Act, 1932	LLP Act, 2008	Companies Act, 2013
Legal Status	No separate legal entity	Separate legal entity	Separate legal entity
Liability	Unlimited, joint & several	Limited to agreed contribution	Limited to shares held (or guarantee)
Perpetual Succession	No — affected by a partner's death/retirement	Yes	Yes

JAIIB tip: An LLP uniquely combines the operational flexibility of a partnership with the limited liability protection of a company — a hybrid structure increasingly popular for professional firms and small businesses.

3 Classes of Share Capital

Equity Share Capital

Ordinary voting rights; residual claim on profits (dividend) and assets (on winding up).

Preference Share Capital

Fixed-rate dividend and priority over equity in dividend/repayment; generally non-voting.

Cumulative vs Non-Cumulative

Cumulative preference dividend arrears accumulate and must be paid before any equity dividend.

Participating vs Non-Participating

Participating preference shares share in surplus profits beyond their fixed dividend.

All preference shares issued in India today must be redeemable — irredeemable preference shares are no longer permitted under the Companies Act, 2013 (redemption generally within 20 years, up to 30 years for specified infrastructure projects).

🪜

The Share Capital Ladder

Authorised (maximum capital a company may raise, per its Memorandum) → Issued (offered to the public) → Subscribed (actually taken up by investors) → Called-up (amount demanded so far) → Paid-up (amount actually received).

4 Issue of Shares

Shares can be issued in three ways relative to their face (nominal) value:

At Par

Issue price equals the face value of the share.

At Premium

Issue price exceeds face value; the excess is credited to the Securities Premium Account, whose use is restricted under Section 52.

At Discount

Issue price is below face value — generally prohibited under Section 53, except for sweat equity shares issued to employees/directors.

Payment for shares is typically collected in instalments: Application Money (on applying), Allotment Money (on allotment), and one or more Call Money instalments (First Call, Second Call, and so on) as the Board demands.

5 Forfeiture and Reissue of Shares

If a shareholder fails to pay a call when due, the Board of Directors may, as per the Articles of Association, forfeit those shares — cancelling the shareholder's membership and treating any amount already received on them as forfeited (transferred to a Forfeited Shares Account).

JAIIB tip: Forfeited shares can be reissued at par, at a premium, or even at a discount — but the total discount allowed on reissue can never exceed the amount already forfeited on those specific shares.

6 Non-Voting Shares / Differential Voting Rights (DVR)

Ordinarily, one equity share carries one vote. However, the Companies (Share Capital and Debentures) Rules permit a company to issue equity shares with Differential Voting Rights (DVR) — carrying either superior or inferior voting rights compared to ordinary equity shares — subject to conditions such as a track record of distributable profits and no default in statutory filings.

Shares with lower/no voting rights typically compensate investors with a higher rate of dividend, to remain fair to shareholders who forgo a say in company management.

7 Form of Balance Sheet — Schedule III

Division I For companies following AS (non-Ind AS)

Division II For companies following Ind AS

Schedule III to the Companies Act, 2013 replaced the older, more flexible Schedule VI — mandating a fixed vertical format, with assets and liabilities strictly classified as Current and Non-Current, ensuring far greater comparability across companies than the earlier free-form layout.

8 Impact of Ind AS on Financial Statements

Fair Value Measurement

Many financial instruments now move from pure historical cost to fair value.

Other Comprehensive Income (OCI)

A new statement component captures gains/losses not routed through regular P&L.

Expected Credit Loss (ECL) Model

Provisioning shifts from an "incurred loss" to a forward-looking "expected loss" approach.

Lease Accounting (Ind AS 116)

Almost all leases now appear on the Balance Sheet as a Right-of-Use asset and corresponding liability.

JAIIB tip: Ind AS 109's Expected Credit Loss model is the accounting-side mirror of the prudential move (globally, via Basel) toward forward-looking, model-based provisioning — a concept worth connecting to NPA provisioning norms.

✓ Key Takeaways

A Company is a separate legal entity with perpetual succession and limited liability — unlike a Partnership, which has neither by default.
The Share Capital ladder runs Authorised → Issued → Subscribed → Called-up → Paid-up.
Shares may be issued at par or premium freely, but at a discount only as sweat equity (Section 53).
Forfeited shares can be reissued at a discount, but never exceeding the amount already forfeited on them.
Schedule III (Division I for AS, Division II for Ind AS) mandates a fixed vertical Balance Sheet format with Current/Non-Current classification.
Ind AS brings fair value measurement, OCI, the Expected Credit Loss model, and on-balance-sheet lease accounting.

📝 Top 50 JAIIB-Style MCQs on Company Accounts

Test your understanding with these 50 practice MCQs, closely modelled on the pattern expected in the JAIIB AFM exam — including combination-answer questions. Each question has 5 options — the correct answer is hidden by default; tap "Show Answer" to reveal it along with a short explanation.

🏢 Definition and Types of Companies

1 A Company is defined under which Section of the Companies Act, 2013?

A. Section 2(20)

B. Section 92

C. Section 128

D. Section 135

E. Section 53

Answer: A. Section 2(20) defines a Company.

2 A Private Company can have a maximum of how many members?

A. 50

B. 100

C. 200

D. No limit

E. 7

Answer: C. A Private Company's maximum membership is 200.

3 A Public Company must have a minimum of how many members?

A. 2

B. 7

C. 50

D. 200

E. 1

Answer: B. A Public Company needs a minimum of 7 members.

4 A Government Company is one in which the Government holds paid-up share capital of at least:

A. 26%

B. 40%

C. 51%

D. 75%

E. 100%

Answer: C. The Government must hold at least 51%.

5 An OPC (One Person Company) is best described as:

A. A public company with unlimited members

B. A private company variant formed by a single member

C. A partnership firm

D. A Section 8 non-profit entity only

E. An LLP with one designated partner

Answer: B. An OPC is a private-company variant with a single member.

⚖️ Partnership vs LLP vs Company

6 A Partnership firm is governed by:

A. Companies Act, 2013

B. Indian Partnership Act, 1932

C. LLP Act, 2008

D. Banking Regulation Act, 1949

E. Negotiable Instruments Act, 1881

Answer: B. Partnerships are governed by the Indian Partnership Act, 1932.

7 Which of these has NO separate legal entity, distinct from its owners?

A. A Company

B. An LLP

C. A Partnership firm

D. A Government Company

E. A Section 8 Company

Answer: C. A Partnership has no separate legal entity.

8 Liability of partners in a traditional Partnership firm is:

A. Limited to capital contributed

B. Unlimited, joint and several

C. Zero, by default

D. Limited to share value only

E. Borne entirely by the government

Answer: B. Partners bear unlimited, joint and several liability.

9 An LLP combines features of:

A. A sole proprietorship and a trust

B. A partnership's flexibility with a company's limited liability

C. Only unlimited liability structures

D. Only government entities

E. A cooperative society only

Answer: B. LLP blends partnership flexibility with limited liability.

10 Perpetual succession, i.e., continuity unaffected by a member's death, is a feature of: (i) Company (ii) LLP (iii) Traditional Partnership

A. (i) only

B. (i) and (ii) only

C. (iii) only

D. All of (i), (ii) and (iii)

E. None of these

Answer: B. Company and LLP have perpetual succession; a traditional Partnership does not.

📜 Classes of Share Capital

11 Which class of shareholders normally has voting rights?

A. Preference shareholders

B. Equity shareholders

C. Debenture holders

D. Depositors

E. None of the above

Answer: B. Equity shareholders normally carry voting rights.

12 Cumulative Preference Shares mean that unpaid dividend:

A. Is permanently forfeited

B. Accumulates and must be paid before any equity dividend

C. Converts automatically into equity shares

D. Is paid only to the government

E. Has no bearing on future dividends

Answer: B. Cumulative dividend arrears accumulate and are paid first.

13 Under the Companies Act, 2013, preference shares issued in India must generally be:

A. Irredeemable

B. Redeemable

C. Convertible into debentures only

D. Non-transferable forever

E. Issued only to the promoter

Answer: B. All preference shares must now be redeemable.

14 Arrange the share capital ladder in the correct order: (i) Called-up (ii) Authorised (iii) Subscribed (iv) Issued (v) Paid-up

A. (ii) → (iv) → (iii) → (i) → (v)

B. (i) → (ii) → (iii) → (iv) → (v)

C. (v) → (i) → (iii) → (iv) → (ii)

D. (iv) → (ii) → (i) → (iii) → (v)

E. (ii) → (iii) → (iv) → (v) → (i)

Answer: A. Authorised → Issued → Subscribed → Called-up → Paid-up.

15 Participating Preference Shares are entitled to:

A. Only their fixed dividend, nothing more

B. A fixed dividend plus a share in surplus profits

C. Voting rights equal to equity shares always

D. No dividend at all

E. Only capital repayment on winding up, no dividend

Answer: B. Participating preference shares share in surplus profits too.

💰 Issue of Shares

16 When a share is issued above its face value, the excess is credited to:

A. General Reserve

B. Securities Premium Account

C. Capital Redemption Reserve

D. Profit and Loss Account

E. Forfeited Shares Account

Answer: B. Share premium is credited to the Securities Premium Account.

17 Issue of shares at a discount is generally:

A. Freely permitted for all companies

B. Prohibited, except for sweat equity shares

C. Mandatory for all new issues

D. Permitted only for preference shares

E. Permitted only for government companies

Answer: B. Discount issue is prohibited except for sweat equity.

18 The use of the Securities Premium Account is restricted under which Section?

A. Section 42

B. Section 52

C. Section 68

D. Section 135

E. Section 149

Answer: B. Section 52 restricts use of the Securities Premium Account.

19 Instalments collected from shareholders on shares typically include: (i) Application Money (ii) Allotment Money (iii) Call Money

A. (i) only

B. (i) and (ii) only

C. (iii) only

D. All of (i), (ii) and (iii)

E. None of these

Answer: D. All three are standard payment instalments for shares.

20 "Sweat Equity Shares" are issued to:

A. The general public at a premium only

B. Employees/directors, often at a discount or for consideration other than cash

C. The government exclusively

D. Foreign institutional investors only

E. Preference shareholders only

Answer: B. Sweat equity shares go to employees/directors, often at a discount.

🗑️ Forfeiture and Reissue of Shares

21 Shares are forfeited when a shareholder:

A. Sells shares to another investor

B. Fails to pay a call when due

C. Attends the AGM

D. Receives a dividend

E. Transfers shares to a family member

Answer: B. Non-payment of a call leads to forfeiture.

22 Forfeiture of shares is authorised by:

A. The Board of Directors, as per the Articles of Association

B. Any single shareholder

C. The RBI

D. The company's auditor

E. The Registrar of Companies automatically

Answer: A. The Board forfeits shares per the Articles.

23 Amount already received on forfeited shares is transferred to:

A. Forfeited Shares Account

B. Statutory Reserve

C. Securities Premium Account

D. Capital Redemption Reserve

E. General Reserve directly

Answer: A. It is transferred to the Forfeited Shares Account.

24 The discount allowed on reissue of forfeited shares:

A. Can be any amount, without limit

B. Cannot exceed the amount already forfeited on those shares

C. Is always zero

D. Must equal the face value

E. Is fixed by the RBI

Answer: B. Reissue discount is capped at the amount forfeited.

25 Forfeited shares can be reissued:

A. Only at par

B. At par, at a premium, or at a discount (within limits)

C. Only to the original shareholder

D. Never; they must be destroyed

E. Only after 10 years

Answer: B. Reissue is possible at par, premium, or a limited discount.

🗳️ Non-Voting Shares / DVR

26 DVR stands for:

A. Debt Valuation Ratio

B. Differential Voting Rights

C. Direct Value Recovery

D. Deferred Voting Requirement

E. Dividend Variation Rate

Answer: B. DVR means Differential Voting Rights.

27 Shares with lower or no voting rights typically compensate holders with:

A. A lower dividend rate

B. A higher dividend rate

C. Automatic board seats

D. No compensation at all

E. Guaranteed capital appreciation

Answer: B. Lower voting power is typically compensated with a higher dividend.

28 A company issuing DVR shares must generally show a track record of:

A. Loss-making operations

B. Distributable profits and no default in statutory filings

C. Government ownership

D. Foreign listing

E. Zero debt

Answer: B. A profitable, compliant track record is required for DVR issuance.

29 Under standard rules, one ordinary equity share ordinarily carries:

A. Two votes

B. One vote

C. No votes at all

D. Votes proportional to dividend received

E. Votes only during a merger

Answer: B. One equity share ordinarily carries one vote.

30 DVR shares can carry:

A. Only superior voting rights

B. Either superior or inferior voting rights

C. Only inferior voting rights

D. Voting rights identical to preference shares always

E. No dividend rights whatsoever

Answer: B. DVR shares may carry superior or inferior voting rights.

📋 Form of Balance Sheet — Schedule III

31 Schedule III to the Companies Act, 2013 mandates a:

A. Free-form horizontal layout

B. Fixed vertical format with Current/Non-Current classification

C. Layout chosen solely by the company's auditor

D. Format applicable only to banks

E. No fixed structure at all

Answer: B. Schedule III mandates a fixed vertical, Current/Non-Current format.

32 Division I of Schedule III applies to companies following:

A. Ind AS

B. Traditional AS (non-Ind AS)

C. US GAAP

D. IFRS directly

E. No accounting framework

Answer: B. Division I applies to non-Ind AS (traditional AS) companies.

33 Schedule III replaced which older schedule?

A. Schedule I

B. Schedule VI

C. Schedule IV

D. Schedule V

E. Schedule VII

Answer: B. Schedule III replaced the older Schedule VI.

34 Division II of Schedule III applies to companies following:

A. Ind AS

B. Traditional AS only

C. US GAAP exclusively

D. Cash-basis accounting

E. No standard framework

Answer: A. Division II applies to Ind AS companies.

35 Banks prepare their Balance Sheet under a fixed format prescribed by:

A. Schedule III to the Companies Act, 2013 (Form A applies to companies generally)

B. Form A under the Third Schedule, Banking Regulation Act, 1949

C. The RTI Act, 2005

D. The Negotiable Instruments Act, 1881

E. No prescribed format

Answer: B. Banks use Form A under the Banking Regulation Act's Third Schedule.

🌐 Impact of Ind AS on Financial Statements

36 Ind AS moves many financial instruments from historical cost toward:

A. Fair value measurement

B. Replacement cost only

C. Zero value

D. Face value only

E. Market value only for land

Answer: A. Ind AS emphasises fair value measurement.

37 OCI stands for:

A. Operating Cash Income

B. Other Comprehensive Income

C. Overall Company Investment

D. Outstanding Credit Instrument

E. Open Currency Interest

Answer: B. OCI is Other Comprehensive Income.

38 The Expected Credit Loss (ECL) model represents a shift from:

A. Cash basis to accrual basis

B. An "incurred loss" to a forward-looking "expected loss" approach

C. IFRS to US GAAP

D. Vertical to horizontal Balance Sheet format

E. Equity to debt financing

Answer: B. ECL is a forward-looking model, replacing the incurred-loss approach.

39 Under Ind AS 116, most leases are now shown on the Balance Sheet as:

A. Off-balance-sheet items only

B. A Right-of-Use asset with a corresponding lease liability

C. Pure expense items, never capitalised

D. Contingent liabilities only

E. Equity instruments

Answer: B. Ind AS 116 requires a Right-of-Use asset and lease liability.

40 Which of these are impacts of Ind AS adoption? (i) Fair value measurement (ii) Expected Credit Loss model (iii) On-balance-sheet lease accounting

A. (i) only

B. (i) and (ii) only

C. (iii) only

D. All of (i), (ii) and (iii)

E. None of these

Answer: D. All three are genuine impacts of Ind AS.

🔁 Comprehensive Review

41 A Holding Company controls a Subsidiary Company by:

A. Holding > 50% of voting power, or controlling Board composition

B. Being located in the same city

C. Sharing the same auditor

D. Having identical share capital

E. Having the same registered office address only

Answer: A. Control via voting power or Board composition defines the relationship.

42 A Section 8 Company is primarily formed for:

A. Maximising shareholder dividend

B. Charitable or non-profit objects, reinvesting profits

C. Government revenue generation

D. Foreign trade exclusively

E. Banking operations only

Answer: B. Section 8 companies pursue charitable/non-profit objects.

43 Preference shareholders can typically vote:

A. On every resolution, exactly like equity shareholders

B. Only on resolutions directly affecting their rights, or if dividend is in arrears beyond a specified period

C. Never, under any circumstances

D. Only at the AGM's start

E. Only if they also hold equity shares

Answer: B. Preference shareholders get limited voting rights in specific situations.

44 Maximum redemption period for preference shares issued for infrastructure projects can extend up to:

A. 10 years

B. 20 years

C. 30 years

D. 50 years

E. Indefinitely (irredeemable)

Answer: C. Infrastructure companies may issue preference shares redeemable up to 30 years.

45 The "Order of Permanence" for Balance Sheet presentation lists:

A. Cash first, fixed assets last

B. Fixed assets first, cash last

C. Only current assets, in any order

D. Liabilities before assets always

E. Alphabetical order of account names

Answer: B. Order of Permanence lists fixed assets first, cash last.

46 Which of these correctly distinguishes "Issued" from "Subscribed" capital?

A. Issued is what's offered to the public; Subscribed is what investors actually take up

B. They are always identical amounts

C. Subscribed capital always exceeds Authorised capital

D. Issued capital is always paid up in full instantly

E. Subscribed capital is set by the RBI

Answer: A. Issued is offered; Subscribed is what's actually taken up.

47 An LLP requires a minimum of how many partners?

A. 1

B. 2

C. 7

D. 50

E. 200

Answer: B. An LLP requires a minimum of 2 partners.

48 A key reason Ind AS improves financial statement usefulness for lenders is:

A. It hides related-party transactions

B. Fair value and forward-looking provisioning give a more current, realistic financial picture

C. It eliminates the need for any audit

D. It removes disclosure requirements

E. It applies only to government companies

Answer: B. Fair value and ECL give a more current, realistic picture for lenders.

49 A company's Memorandum of Association specifies its:

A. Daily transaction vouchers

B. Authorised share capital, among other fundamental details

C. Concurrent audit schedule

D. Bank reconciliation policy

E. Employee salary structure

Answer: B. The Memorandum specifies Authorised capital and fundamental company details.

50 For JAIIB purposes, the single most important consequence of Ind AS convergence for banks appraising corporate borrowers is:

A. Borrowers' financial statements may look materially different under Ind AS vs traditional AS, affecting ratio analysis

B. No impact at all on credit appraisal

C. Ind AS applies only to public sector banks

D. Ind AS eliminates the need for financial statement analysis

E. Ind AS is identical to the Banking Regulation Act format

Answer: A. Ind AS-based statements can look materially different, affecting ratio-based credit appraisal.

Continue your JAIIB preparation on AskBanker.in

Explore related topics: our Final Accounts guide, our Accounting Standards, GAAP & IFRS guide, our Cash Flow & Funds Flow guide, our Final Accounts of Banking Companies guide, our Credit Management guide, and the complete JAIIB / CAIIB Library on AskBanker.in.

Disclaimer: This article is prepared for educational and exam-preparation purposes only. Content reflects the Companies Act, 2013, ICAI/ASB pronouncements, and established practice, as of September 2026. Candidates should cross-check the latest official IIBF syllabus and current notifications before the exam.