Q26
1 markMCQSection A

The nominal capital of Dharma Ltd. is :

Accounting for Share Capital
Nominal (Authorised) Share Capital

Options

(A)Rs. 30,00,000
(B)Rs. 3,00,000
(C)Rs. 9,00,000
(D)Rs. 33,00,000
Official Answer

Correct option: (A) Rs. 30,00,000.


  • Nominal (or Authorised or Registered) capital is the maximum amount of capital a company is authorised to raise, as stated in its Memorandum of Association.
  • Dharma Ltd. is registered with an authorised capital of 3,00,000 equity shares of Rs. 10 each = Rs. 30,00,000, regardless of how many shares are actually issued or subscribed.
nominal capitalauthorised capitalregistered capitalmemorandum of associationshare capital categoriesequity shares

Marking Scheme

  • 11 mark for selecting (A) Rs. 30,00,000 — no partial credit for other options.

Hint

Nominal capital = shares stated in the Memorandum of Association, not the shares actually offered or subscribed.

Quick Oral Answer

Nominal capital is the maximum capital a company can raise as stated in its Memorandum — here, 3,00,000 shares of Rs. 10 each equals Rs. 30,00,000.

Analysis & Explanation

This question tests the very first category in the hierarchy of share capital: Authorised (Nominal) → Issued → Subscribed → Called-up → Paid-up.


Why (A) is correct


  • The Memorandum of Association fixes the ceiling on capital the company can ever raise — here Rs. 30,00,000 (3,00,000 shares × Rs. 10) — this is the nominal/authorised capital, untouched by how many shares are later offered or subscribed.

Why the distractors are wrong


  • (B) Rs. 3,00,000 confuses the number of authorised shares (3,00,000) with the rupee amount.
  • (C) Rs. 9,00,000 is actually the Issued Capital (90,000 shares offered for subscription), tested separately in Q27.
  • (D) Rs. 33,00,000 has no basis in the facts given; it appears to add an arbitrary Rs. 3,00,000 to the authorised capital.

Common Mistakes

  1. 1Confusing nominal/authorised capital with issued capital (the shares actually offered to the public).
  2. 2Writing the number of shares (3,00,000) instead of the rupee value (Rs. 30,00,000).

Interesting Facts

A company can increase its authorised capital any time by passing an ordinary resolution and filing Form SH-7 with the Registrar of Companies, without needing to actually issue new shares immediately.

Under Schedule III of the Companies Act, 2013, authorised capital must be disclosed separately in the Notes to Accounts even though it does not form part of the Balance Sheet total.

Spotted a mistake or something unclear?

Tell us — we fix reported answers fast.

Frequently Asked Questions

Is nominal capital the same as issued capital?

No. Nominal (authorised) capital is the maximum limit set in the Memorandum of Association; issued capital is only the portion of that limit actually offered to the public for subscription — here Rs. 9,00,000 out of Rs. 30,00,000.