Class 12 Account Important Qns & Ans 2080 / 2081 Part 1 | Grade 12 Principle of Accounting Important Questions

Hi Class 12 students, we have prepared important questions for the Account subject for your Class 12 board exam 2080/2081. This is part one of the important QNs & and collection for Grade 12 Principle of Accounting.

Class 12 Account Important Qns & Ans Part 1 | Grade 12 Principle of Accounting Imp Qns 

Class 12 Account Important Qns & Ans | Part 1

Unit: Accounting for Companies

Company Formation, Types & Documents

1. What is a public company?

A public company is a company that collects its capital by way of selling shares openly to people. The ownership of the shares is transferable from one person to another. The financial liability of each member is limited to the extent of the value of the share purchased. The minimum number of members is seven and the maximum number of members is unlimited. There is complete freedom to make invitations to the general public for subscription to its shares and debentures.

2. Write in brief any three advantages of a Public Limited Company.

The three advantages of a Public Limited Company are as follows:

• The shares of the company are transferable from one person to another person.
• Every shareholder's financial liability is limited to the extent of the share value he has purchased.
• Effective and efficient management is possible.

3. What is company?

A company is a voluntary association of persons formed for a common purpose. Its total capital is split into small units called shares. It is created by law with a perpetual succession and a common seal. Each member of the company is called a shareholder. The financial liability of the shareholder is limited. Shares of a company are transferable.

4.  Mention the characteristics of a company.

The characteristics of a company are given below:

• The existence of a company does not depend on the life of its members.
• A company has a common seal which is used as the company's signature in all its
• important document.
• The financial liability of each member is limited.
• The shares of a company are transferable from one person to another. 

5. State any three advantages of the company,

The three advantages of a Company are:

1. The shares held by the shareholders are transferrable from one person to another.
2. A large capital can be collected by way of selling shares openly to the public which helps to carry out business activities on a large scale.
3. An effective and efficient management is possible.

6. Mention the different characteristics of a company. 

1. A company is an artificial person created by law and has a separate legal existence. It can buy and sell the property in its own name, can sue others and can be sued by others, conduct a lawful business, and enter into contracts with others.
2. It enjoys the benefit of a separate legal entity from its owners.
3. It has a long life. The death, insolvency, or lunacy of a member does not affect their life. 
4. The share of companies is transferrable from one person to another person. 
5. It has a common seal. The seal is affixed on all documents to make them legally valid.
6. A company is managed and run by democratically elected members called directors. The directors are the legal representatives of the shareholders. 

7. What is a private company?

 A private company is a company that is established under the Companies Act having a minimum number of members and a maximum number of members limited to the extent of fifty. The law restricts the right to transfer its shares freely, limits the maximum number of members to fifty, and prohibits any invitation to the public to subscribe for any shares or debenture of the company.

8. State any five differences between a public limited company and a private limited company. 

Public Limited Company	Private Limited Company
The minimum number of members required is seven and there is no limit on the maximum number of members.	The minimum number of members required is one and the maximum number of members is 50.
It invites public subscriptions from the public for issuing shares and debentures.	It can not invite public subscriptions for issuing shares and debentures.
The ownership of shares of a public limited company is transferable from one person to another.	The ownership of shares of a private limited company is not transferable according to the Company Act.
A public Ltd. co. can not start its business after its registration. It requires to obtain a certificate of commencement of business.	A private limited company can start its business after getting the certificate of incorporation.
A public Ltd. company is required to submit a prospectus at the time of its incorporation.	It does not require submitting a prospectus at the time of incorporation.

 

9. What do you mean by private limited company? Mention features of a private limited company.

A private company is a company that is established under the Companies Act having a minimum number of members and a maximum number of members limited to the extent of fifty. The law restricts the right to transfer its shares freely, limits the maximum number of members to fifty, and prohibits any invitation to the public to subscribe for any shares or debenture of the company.

Features of a private limited company are:

1. The minimum number of members is one and the maximum number of members is limited to the extent of fifty.
2. A private company need not issue a prospectus.
3. The word private limited a suffixed after the name of the company. It is not necessary to hold a statutory meeting.
4. It restricts the right to transfer its shares.
5. It need not obtain the certificate of commencement.
6. It does not invite the public to purchase its shares and debentures.

10. State the privileges enjoyed by a private company.

Under the Companies Act, a private company is entitled to certain privileges and is exempted from the compliance of certain provisions of the Company Act. Following are the advantages/ privileges enjoyed by a private company as compared to a public company:

• A private company can be established by a single person.
• A private company need not issue a prospectus.
• A private company can commence its business immediately after its incorporation and need not obtain the certificate of commencement from the company register.
• A private company is not required to hold a statutory meeting.
• It can refuse the transfer of shares from one member to another.

11. What is a statutory company?

A company established by a special act of legislation is called a statutory company. It is formed mainly to provide public utility services. The objectives, power, and activities are well defined under the special act so passed by the parliament. Examples of statutory companies are Nepal Rastra Bank, Agriculture Development Bank, and Nepal Industrial Development Corporation.

12.  Write the meaning of a registered company with a suitable example. 

A company that is established and registered under the Companies Act is known as a registered company. In Nepal, registered companies are established under the Company Act, of 2063. Example of the registered companies is Bhrikuti Pulp and Paper Mills Ltd., and Gorkha Biscuits Pvt. Ltd.

13. What is a chartered company? Give any two suitable examples.

Chartered Company is a company which is established by the Royal charter or with a special approval from the head of the state examples of chartered companies are the British East India Company, Hudson's Bay Company, Bank of England, British East Africa Company, etc.

14. What are the different documents required for incorporating a company as a corporate body?

There are three main documents used for registering a company. These three documents are: 

1. Memorandum of Association 
2.  Articles of Association 
3.  Prospectus.

These three documents are the life-giving documents of a company because the company cannot be registered without presenting them to the company registrar's office. The promoters of the company must submit these documents along with the application to the company registrar's office to incorporate the company as a corporate body.

15. What is prospectus? OR Define prospectus and mention contents to be stated in prospectus.

A prospectus is a document used for giving notice, a circular for inviting the public to subscribe to shares and debentures of a company. It is circulated basically to inform the public about the company and stimulate them to buy shares of the company. The public company has to issue a prospectus inviting people to subscribe to share the company. It contains a past summary (if any), present position, and future prospects of the company. It also provides information about the terms and conditions of shares and debentures issued by the company.

Its main purpose is to invite the public to purchase shares and debentures of the company. The contents of the prospectus are as follows:

• Things are related to the management and objectives of the company.
• Number of shares subscribed by directors and cash received from them and their introduction profiles.
• Matters relating to bonus shares,
• Minimum number of shares taken up and money to be paid on share application. Terms and mode of payment, issue of shares on discount or premium.
• Details about brokerage, underwriting commission, and preliminary expenses. Estimated incomes and expenditure of the company at least for the coming three years. 
• Other necessary information.

16. Write in brief about the memorandum of Association?

The memorandum of association is one of the most important documents of a company which is required to be submitted at the time of incorporation. It contains the fundamental rules binding upon the constitution and activities of the company. It defines the objectives and powers of a company and the company's relationship with the outside world. Great care should be taken while preparing the memorandum of association. It must be prepared to remain within the periphery of the company act. The memorandum must not be in contradiction to the Companies Act otherwise it is considered null and void. It contains information like the full name of the company address of the registered office and place of its operations, objectives of the company, activities to be performed, authorized capital, types of share capital with their numbers and nominal value per share, restriction, if any in transferability of shares, number of shares the promoters have undertaken and other necessary matters. 

17. What are articles of association?

 Articles of Association is an essential document for incorporation of a company. It is the by-laws of a company. It contains rules and regulations for the internal management of the company. It must not violate the provisions laid down in the memorandum of association. It clearly defines the mode and manner in which the company's business is to be carried on to achieve the objectives as stated in the memorandum of association. If contains information like procedures for convening the general meeting, proceedings of the general meeting, number of directors and their tenure, provisions relating to minutes of the decision of both AGM and BOD meeting, the minimum number of shares required to become director, powers, and duties of directors, the quorum required for BOD meeting classes of share and rights powers restriction, provision for calls on share and forfeiture, transfer of shares matters on buying back shares appointment of company secretary books of account and audit of the company, amalgamation, and other related matters.