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Corporate Accounting University of calicut notes | College Tutor AI

Corporate Accounting University of calicut notes

January 5, 2026

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3 min read

•Corporate Accounting

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Exam Questions (3 & 5 marks)

From Corporate Accounting

Q1. How do you compute bonus shares to be issued from a given ratio? Explain with a short example.

3 marks

Answer

Bonus ratio tells how many new shares are issued for existing shares.

Example: Bonus ratio 1:5 means 1 bonus share for every 5 existing shares. If a shareholder holds 1,000 shares:

Bonus shares = 1,000 ÷ 5 = 200 shares

Bonus ratio	Meaning
1:5	1 new for 5 existing

Thus, Bonus shares = Existing shares × (Bonus / Existing in ratio).

Q2. Explain underwriter’s liability (net liability) computation logic with a neat table.

3 marks

Answer

Underwriter’s net liability is the number of securities the underwriter must take up.

Step	Computation
1	Gross liability (as per agreement ratio)
2	Less: Marked applications (of that underwriter)
3	Less: share of unmarked applications (in gross ratio)
4	= Net liability

Firm underwriting is added/treated separately as per terms of the problem.

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Q3. Explain Reconstruction (Capital Reduction) Account with format entries and its application (use a table).

5 marks

Answer

Meaning

Reconstruction (Capital Reduction) Account records the total sacrifice made by shareholders/creditors and then applies it to write off losses and reduce overvalued assets.

How it is credited (sources)

reduction in share capital (shareholders’ sacrifice)
reduction in creditors/liabilities (creditors’ sacrifice)

How it is debited (utilisation)

write off P&L debit balance
eliminate fictitious assets
write down assets / create provisions

Side	Typical items
Credit	sacrifices (capital, creditors)
Debit	write-offs (losses, fictitious assets)

Conclusion

It acts like a “clean-up fund”: sacrifice creates the fund and write-offs use the fund to rebuild a healthy balance sheet.