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Analysing Common Size Profit and Loss

According to ...

Question

According to the Companies Act, $2013$ , a company may issue fully paid up bonus shares to its members, out of ___________.

A

Free reserves

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B

Security premium account

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C

Capital redemption reserve account

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D

All of the above

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Solution

The correct option is D All of the above
Bonus shares are issued by the company to the existing shareholders when the company is having short of cash but the shareholders are expecting a regular income. Issue of bonus shares does not involve any cash outflow.
The Companies Act 2013 has specifically introduced section 63 to deal with bonus shares. The company can issue fully paid bonus shares from the following sources:
Free reserves of the company
Share premium account
Capital redemption reserve account

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Q. Assertion :Under the provisions of new Company Act 2013, a company may issue fully paid-up bonus shares out of its free reserves, security premium account and the capital redemption reserve account. Reason: According to the new provisions of Company Act, 2013, no issue of bonus shares shall be made by capitalising reserves created by the revaluation of assets.

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