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:

Savers

Individuals or entities that set aside a portion of current income for future use, often by depositing money in savings accounts or investing in securities.

Inflation Rate

The speed at which the overall price level of goods and services increases, leading to a decrease in purchasing power.

Nominal Interest Rate

The interest rate expressed in terms of annual amounts currently charged for interest and not adjusted for inflation.

Real Interest Rate

The interest rate expressed in dollars of constant value (adjusted for inflation) and equal to the nominal interest rate minus the expected rate of inflation.