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Accounting for Bonus Issue Notes

Accounting for Bonus Issue Notes

Meaning of Accounting for Bonus Issue Notes –

Definition of Accounting for Bonus Issue Notes –

Accounting for Bonus Issue Notes are given here. Capitalization of profits refers to the process of converting profits or reserves into paid up capital.”
A company may capitalize its profits or reserves which otherwise are available for distribution as dividends among the members by issuing fully paid bonus shares to the members.
A bonus share may be defined as a free share of stock given to current shareholders in a company, based upon the number of shares that the shareholder already owns. While the issue of bonus shares increases the total number of shares issued and owned, it does not increase the net worth of the company. Although the total number of issued shares increases, the ratio of number of shares held by each shareholder remains constant. An issue of bonus shares is referred to as a bonus issue. Depending upon the constitutional documents of the company, only certain classes of shares may be entitled to bonus issues, or may be entitled to bonus issues in preference to other classes. No new funds are raised with a bonus issue.
A bonus issue (or scrip issue) is a stock split in which a company issues new shares without charge in order to bring its issued capital in line with its employed capital (the increased capital available to the company after profits). This usually happens after a company has made profits, thus increasing its employed capital.
If the subscribed and paid up capital exceeds the authorized share capital as a result of bonus issue, a resolution shall be passed by the company at its general body meeting for increasing the authorized capital.
A return of bonus issue along with a copy of resolution authorizing the issue of bonus shares is also required to be filed with the Registrar of Companies.

Accounting for Bonus Issue Notes

Accounting for Bonus Issue Notes

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