Question

Match List-I with List-II

List-I	List-II
(A) Share capital	(I) Will be called at the time of winding up
(B) Reserves and surplus	(II) Calls in advance
(C) Reserve capital	(III) Subscribed but not fully paid
(D) Current liabilities	(IV) Sinking fund

Choose the correct answer from the options given below:

• (A) - (I), (B) - (II), (C) - (III), (D) - (IV)
• (A) - (I), (B) - (III), (C) - (II), (D) - (IV)
• (A) - (III), (B) - (IV), (C) - (II), (D) - (I)
• (A) - (IV), (B) - (III), (C) - (II), (D) - (I)

Answer 1

The Correct Option is A

Matching Financial Terms 

This exercise involves matching financial terms with their correct descriptions, providing a deeper understanding of accounting principles.

Matching Pairs

Here's the breakdown of each matched pair:

• (A) Share Capital - (I) Will be called at the time of winding up:
  • Explanation: Share capital represents funds raised by a company through issuing shares. A portion of the share capital may remain uncalled (not yet requested from shareholders). In the event of winding up (liquidation), the company may call up this unpaid capital to settle debts.
• (B) Reserves and Surplus - (II) Calls in advance:
  • Explanation: Reserves and surplus represent accumulated profits and other funds set aside by the company. While "calls in advance" (money received from shareholders before it's due) is technically a liability, it is often managed within the reserves and surplus section until the call is actually made.
• (C) Reserve Capital - (III) Subscribed but not fully paid:
  • Explanation: Reserve capital is a portion of the subscribed capital (the amount shareholders have agreed to pay) that has *not* yet been called up by the company. It's essentially a commitment from shareholders to pay this amount in the future, typically reserved for financial stability or emergencies.
• (D) Current Liabilities - (IV) Sinking Fund:
  • Explanation: Current liabilities are obligations that a company expects to settle within one year. A sinking fund is a fund established to accumulate money over time to repay a debt (often a long-term debt), not necessarily current liabilities. However, sinking funds can be related to current liabilities if a portion of the debt is due within the next year.

Conclusion

The correct matching sequence is:

(A) - (I), (B) - (II), (C) - (III), (D) - (IV)

Important Notes

• This matching exercise helps reinforce the understanding of key financial terms.
• Understanding these concepts is critical for financial analysis and decision-making.

Answer 2

Matching Financial Terminology 

This exercise involves associating financial terms with their correct descriptions, offering a better grasp of accounting concepts.

Matching Pairs

Below is the list of matched pairs with their respective explanations:

• (A) Share Capital - (I) To be called upon during liquidation:
  • Explanation: Share capital refers to the funds raised by a company through the issuance of shares. Some share capital may remain uncalled, meaning it hasn't been requested from shareholders yet. During liquidation, the company can call up this unpaid capital to settle its debts.
• (B) Reserves and Surplus - (II) Calls made in advance:
  • Explanation: Reserves and surplus reflect accumulated profits and funds set aside by the company. Although "calls in advance" (funds received from shareholders before they are due) are classified as a liability, they are typically treated within the reserves and surplus section until the call is officially made.
• (C) Reserve Capital - (III) Subscribed but unpaid:
  • Explanation: Reserve capital is a part of subscribed capital (amount agreed to be paid by shareholders) that has not been requested by the company yet. It represents a commitment from shareholders to pay this amount in the future, often held in reserve for financial stability or emergencies.
• (D) Current Liabilities - (IV) Debt repayment fund:
  • Explanation: Current liabilities refer to obligations the company needs to settle within one year. A sinking fund, on the other hand, is established to accumulate money over time for repaying a debt (usually long-term debt). While sinking funds are typically not current liabilities, they can be linked to them if a portion of the debt is due within the year.

Conclusion

The correct matching sequence is:

(A) - (I), (B) - (II), (C) - (III), (D) - (IV)

Key Takeaways

• This exercise aids in reinforcing the understanding of important financial terms.
• Grasping these concepts is essential for effective financial analysis and decision-making.