WHEN SHARES ARE ISSUED TO THE PUBLIC AND THE ISSUING COMPANY HAS NOT REQUESTED FOR PAYMENTS, IT IS REFERRED TO AS
- A. authorized capital
- B. paid-up capital
- C. uncalled capital ✓
- D. unissued capital
The answer to the question is: C. uncalled capital
When shares are issued to the public and the issuing company has not requested for payments, it is referred to as “uncalled capital.” Uncalled capital represents the portion of a company’s authorized capital that has been issued to shareholders but for which the company has not yet requested payment. This concept is important in understanding a company’s financial structure and its potential liabilities.
The term “uncalled capital” is used to describe the amount of money that shareholders have committed to pay for their shares but have not yet been called upon to do so by the company. It is an essential component of a company’s financial position, as it represents potential future cash inflows for the company. Uncalled capital is also known as “unpaid capital” or “unassessed capital.”
In accounting terms, uncalled capital is recorded in the balance sheet under shareholders’ equity. It is a liability of the shareholders to pay the amount when called upon by the company. Until the company requests payment, this amount remains as an obligation of the shareholders and does not contribute to the company’s working capital.
The concept of uncalled capital is particularly relevant in understanding a company’s financial leverage and its ability to raise additional funds without issuing new shares. It also affects the calculation of financial ratios and measures of a company’s financial health.
