Practice Questions: Accounting for Companies Limited by Shares

How to practise effectively

• Separate theory questions (incorporation, company features, contents of the Constitution) from computation questions (capital, share issue, dividends). Practise both because the paper mixes them.
• For share issues, always write the full General Journal entry: Debit Bank, Credit Ordinary Share Capital or Preference Share Capital, then post to the respective ledgers.
• Remember the Companies Act 2016: a company has no authorised (registered) capital. Share capital is issued only as needed.
• For full accounts and complete statements, refer to the worked-example sets; here, focus on the correct calculation steps and the reasoning behind them.

Common mistakes to avoid

• Misunderstanding cumulative preference shares: arrears of dividend MUST be paid first, before ordinary shares, when a dividend is declared again.
• Calculating dividend on the market value of shares. Dividend is calculated on paid-up share capital, not market price.
• Forgetting to distinguish interim dividend (declared mid-year) from final dividend (declared at the end of the financial year).

Practice Questions

1. Question 1

   Question 1 (Theory): Delima Sdn. Bhd. and Kristal Berhad. State TWO differences between a Private Company and a Public Company, and give one suitable example of each (the Public Company being listed on Bursa Malaysia).

   Answer

   Differences (any two):

   1. Number of members: Private has not more than 50 members; Public has no maximum limit.

   2. Transfer of shares: Private restricts share transfer (needs approval); Public transfers shares freely through the exchange.

   3. Offer to public: Private cannot offer shares to the public; Public may offer shares to the public.

   4. Name ending: Private uses 'Sdn. Bhd.'; Public uses 'Bhd.'.

   Examples: Delima Sdn. Bhd. is a private company (family business); Kristal Berhad is a public company (listed on Bursa Malaysia).

2. Question 2

   Question 2 (Computation & Journal): Berlian Maju Berhad issues 200,000 units of ordinary shares at RM1 each. All shares are subscribed and fully paid in cash. Calculate the issued and fully paid-up capital, and show the General Journal entry.

   Answer

   Issued and fully paid-up capital:

   = 200,000 units x RM1

   = RM200,000

   General Journal:

   Debit: Bank RM200,000

   Credit: Ordinary Share Capital RM200,000

   (Issue of 200,000 ordinary shares at RM1 each, fully paid)

   Posting to ledger: debit the Bank account and credit the Ordinary Share Capital account with RM200,000 each.

3. Question 3

   Question 3 (Owners' Equity): On 31 December 2025, Nusa Permai Berhad has Ordinary Share Capital RM500,000, Preference Share Capital RM100,000 and Retained Profits RM80,000. Show the Owners' Equity section in the Statement of Financial Position.

   Answer

   Owners' Equity:

   Ordinary Share Capital RM500,000

   Preference Share Capital RM100,000

   Retained Profits RM80,000

   Total Owners' Equity RM680,000

   Note: For a company, Owners' Equity comprises share capital (ordinary and preference) plus reserves such as retained profits. This differs from a Sole Proprietorship (a single Capital account) and a Partnership (a Capital and a Current account for each partner).

4. Question 4

   Question 4 (Cumulative preference dividend over several years): Cahaya Bintang Berhad has 100,000 cumulative 6% preference shares of RM1 each. No dividend was declared in 2023 and 2024 due to losses. In 2025 the company declares a dividend. Calculate the total preference dividend payable in 2025 and explain the right of cumulative preference shareholders.

   Answer

   Preference dividend per year:

   = 6% x (100,000 x RM1) = 6% x RM100,000 = RM6,000

   Arrears of dividend (cumulative):

   2023: RM6,000

   2024: RM6,000

   Current year 2025: RM6,000

   Total paid in 2025 = RM6,000 + RM6,000 + RM6,000 = RM18,000

   Right of cumulative preference shareholders: unpaid (arrears) dividends from loss years are carried forward and MUST be paid first when profits are sufficient, before any dividend is paid to ordinary shareholders.

5. Question 5

   Question 5 (Interim & final; preference & ordinary): Sinar Kasih Berhad has 400,000 ordinary shares of RM1 and 50,000 8% preference shares of RM1 (non-cumulative). In financial year 2025 the company declares an interim dividend of 3% and a final dividend of 5% on ordinary shares, plus the full preference dividend. Calculate the total cash dividend payable.

   Answer

   Ordinary share dividend:

   Interim = 3% x (400,000 x RM1) = 3% x RM400,000 = RM12,000

   Final = 5% x RM400,000 = RM20,000

   Total ordinary dividend = RM12,000 + RM20,000 = RM32,000

   Preference share dividend:

   = 8% x (50,000 x RM1) = 8% x RM50,000 = RM4,000

   Total cash dividend payable = RM32,000 + RM4,000 = RM36,000

   Remember: the interim dividend is declared in the middle of the financial year, while the final dividend is declared at the end of the financial year.

6. Question 6

   Question 6 (Share subscription): Teratai Indah Berhad offers 500,000 ordinary shares of RM1 to the public. At the close of the subscription period, applications are received for 600,000 shares. Name this situation and propose TWO actions the company may take.

   Answer

   Situation: Over-subscription (applications for 600,000 shares exceed the 500,000 shares offered; excess of 100,000 shares).

   Two actions that may be taken:

   1. Refund the application money for the excess shares to unsuccessful applicants.

   2. Make a pro-rata allotment: each applicant receives shares in a set proportion, and excess money is applied or refunded.

   Conversely, if the issue is under-subscribed (fewer than 500,000 shares), the company may proceed with the issue if the minimum subscription is met, or refund the application money if it is not. Note: under the Companies Act 2016, a company has no registered capital.