Question

The Capital Redemption Reserve Account may be applied by the company __________.

• A. in issuing fully paid bonus shares to its creditors
• B. in issuing fully paid bonus shares to its members
• C. in issuing fully paid bonus shares to its employees
• D. in issuing partly paid bonus shares to its members

Answer 1

The correct option is B in issuing fully paid bonus shares to its members

To the extent that the preference shares are redeemed out of profits Capital Redemption Reserve Account must be credited, debiting the profit and loss Account, general reserve or other accounts showing profits otherwise available for distribution of dividends. Capital Redemption reserve account can be utilized for the issue of fully paid bonus shares to the members of the company.