Question

Arrange the following in the correct order:
(A) Subscribed Capital
(B) Issued Capital
(C) Authorised Capital
(D) Paid-up Capital
(E) Called-up Capital

• A. C, B, A, D, E
• B. B, C, A, D, E
• C. C, B, A, E, D
• D. B, C, A, E, D

Answer 1

The Correct Option is C

Order of Share Capital Types

Understanding the different types of share capital and their relationship to each other is crucial for interpreting a company's financial statements. These capital types represent different stages in the process of issuing and raising funds from shareholders.

Order of Share Capital Types 

The correct order of share capital types is as follows:

1. Authorised Capital: The maximum amount of share capital that a company is legally permitted to issue, as stated in its Memorandum of Association.
2. Issued Capital: The portion of the authorised capital that the company has actually offered to investors for subscription.
3. Subscribed Capital: The portion of the issued capital that investors have agreed to purchase.
4. Called-up Capital: The portion of the subscribed capital that the company has formally requested from shareholders to pay.
5. Paid-up Capital: The portion of the called-up capital that shareholders have actually paid to the company.

Correct Sequence

Therefore, the correct order is Authorised Capital → Issued Capital → Subscribed Capital → Called-up Capital → Paid-up Capital, making Option 3 the correct answer.

Answer 2

Understanding the Progression of Share Capital 

The various stages of share capital represent the progression from the maximum capital a company is authorized to raise to the actual amount it receives from shareholders. The correct sequence is:

1. Authorised Capital (Nominal or Registered Capital): This is the maximum amount of share capital that a company is authorized to issue, as stated in its Memorandum of Association. It represents the upper limit of capital the company can raise through the issuance of shares.
2. Issued Capital: This is the portion of the authorised capital that the company has actually offered to the public (or to private investors) for subscription. It's the amount of capital the company has decided to issue to raise funds.
3. Subscribed Capital: This is the portion of the issued capital that has been subscribed for by the public (or private investors). It represents the total face value of shares applied for by potential shareholders.
4. Called-up Capital: This is the portion of the subscribed capital that the company has actually demanded from its shareholders. The company may not call up the entire amount of the subscribed capital immediately but may do so in installments as needed.
5. Paid-up Capital: This is the portion of the called-up capital that has actually been paid by the shareholders. It represents the amount of cash received by the company against the shares issued.

Therefore, the correct progression is: Authorised → Issued → Subscribed → Called-up → Paid-up Capital.

Understanding this progression is important for interpreting a company's financial statements and assessing its capital structure.