When Shares Are Allotted,or a Call Made on Them,allotment and Call

question 50

Multiple Choice

When shares are allotted,or a call made on them,allotment and call accounts are created respectively.What is the nature of these accounts and how are they to be disclosed in the financial statements?

• A) The accounts are similar in nature to an account receivable and are to be disclosed in the balance sheet as a current asset.
• B) The accounts are similar to a future income benefit and are to be separately disclosed as assets in the balance sheet.
• C) The accounts are similar to an account receivable and are disclosed in the balance sheet as a reduction against share capital.
• D) The accounts are in the nature of a deferred income and are disclosed as a provision for future cash inflows in the balance sheet.
• E) None of the given answers.

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Definitions:

Duration

A measure of the sensitivity of the price of a bond or other debt instrument to changes in interest rates, typically expressed in years.

Bond Convexity

A measure of the curvature or the degree of the curve in the relationship between bond prices and bond yields, demonstrating how the duration of a bond changes as the interest rate changes.

Yield To Maturity

The total return anticipated on a bond if the bond is held until its maturity date, expressed as an annual rate.

Price Volatility

The rate at which the price of a security increases or decreases for a given set of returns, often measured by the standard deviation of historical returns.