Skip to content

CA Intermediate · Advanced Accounting · AS 20 Earnings Per Share

Mehta Components Ltd had 10,00,000 fully paid equity shares of ₹10 each on 1 April 2025. On 1 October 2025 it issued 2,00,000 equity shares of ₹10 each, ₹5 paid up, entitled to dividend only in proportion to the amount paid. The year ends on 31 March 2026. Net profit is ₹33,60,000 and the preference dividend for the year is ₹2,10,000. What is the basic EPS?

Basic EPS is ₹3.00. Earnings available to equity holders are ₹31,50,000 after preference dividend, and weighted shares are 10,50,000 because the partly paid shares count at half for six months. Treating them as fully paid would wrongly give ₹2.86.

  1. A₹3.00Correct
  2. B₹3.20
  3. C₹2.86
  4. D₹3.15

Explanation

Partly paid shares count as a fraction of a fully paid share to the extent they are entitled to dividend: 2,00,000 × 0.5 = 1,00,000 equivalent shares, weighted for 6/12, giving 50,000. Weighted shares = 10,50,000. Earnings = 33,60,000 − 2,10,000 = 31,50,000. EPS = 31,50,000 / 10,50,000 = ₹3.00. Treating the shares as fully paid gives 11,00,000 shares and ₹2.86, which is wrong.

Did you get it right without looking?

One question tells you little. A timed set on AS 20 Earnings Per Share shows your real accuracy, how long you take and where you lose marks.

Practise AS 20 Earnings Per ShareFree diagnostic mock

More AS 20 Earnings Per Share questions