Bonus Shares
Shares issued free of cost to the
existing shareholders by way of capitalisation of profits and reserves are
called “Bonus Shares" The issue of bonus shares implies payment of
dividend in form of shares instead of cash. These new shares are only to the
existing Equity shareholders in proportion to their existing shareholdings.
This increases the issued capital of the company without changing the assets of
the company as it decreases the Reserves & Surplus of the company.
Guidelines by SEBI for issue of Bonus
Shares
1.
The
bonus is made out of free reserves built out of genuine profits or share
premium.
2.
Reserves
created by revaluation of assets are not capitalized.
3.
The
bonus issue is not made unless the partly paid-up equity shares (if any) are
made fully paid-up.
4.
There
should be provision in articles for issue of bonus shares.
Reserves
that can be used for issue of Bonus shares
1.
Profit
and Loss A/c
2.
General
Reserve
3.
Dividend
Equalization Reserve
4.
Profits
on sale of Fixed Assets
5.
Net
Balance in Debenture Redemption Reserve
6.
Capital
Redemption Reserve A/c
7.
Securities
Premium
Note: Capital Redemption Reserve A/c &
Securities Premium can be applied only for issuing fully paid up bonus shares
and not for making partly Paid-up shares as fully Paid-up.
Accounting
Treatment:
A.
If
the bonus is utilised for making partly paid-up shares as fully paid-up
1. Profit & Loss A/c Dr.
General Reserve A/c Dr.
Capital Reserve A/c Dr.
To Bonus to Shareholder’s A/c
2. Share Final Call A/c Dr.
To Share Capital A/c
3. Bonus to
Shareholder’s A/c Dr.
To Share
Final Call A/c
B.
For
issuing fully paid-up Bonus Shares
1.
Profit
& Loss A/c Dr.
General Reserve A/c Dr.
Capital Reserve A/c Dr.
Securities Premium A/c Dr.
Capital Redemption Reserve
A/c Dr.
To Bonus to Shareholder’s A/c
2.
Bonus
to Shareholder’s A/c Dr.
To
Share Capital A/c
To Securities Premium A/c (if any)
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