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Business Studies

Retained Earnings

Bonus shares ...

Question

Bonus shares can be issued out of :

A

Profit and Loss account

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B

Securities Premium account

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C

General 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 cashing in on the free reserves of the company. The assets of a company also consist of cash reserves. A company builds up its reserves by retaining part of its profit over the years (the part that is not paid out as dividend).

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Similar questions

Q. Consider the following statements:
1. The bonus shares shall not be issued in lieu of dividend,
2. A company may issue fully paid up bonus shares to its members out of its 'Capital Redemption Reserve Account'
3. A company may not issue bonus shares out of its 'Securities Premium Account'
Which of the above statement/s is are not correct?

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.

Q. Issue of bonus shares out of reserves will result in __________.

Q. X Ltd. decides to redeem 650, 15% Pref. Shares of Rs. 100 each at 10% premium. It has a General Reserve of Rs. 45,500 and a Securities Premium of Rs. 1,000. If the new equity shares are to be issued at 30% premium, the minimum number of equity shares of Rs 10 each to be issued for the purpose of redemption is ________.

Securities Premium Reserve Account is debited by the amount of premium that has not been received on forfeited shares. Is it correct and why?

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