Well, sometimes if a share price is getting too large, people cant afford to buy the shares, so a company will increase the amount of shares in issue to make them more affordable again.
Profit may be on virtual terms.
L, sir, How we will record (accounting entry) while receiving bonus shares?
Accounting, from an accounting perspective, a bonus issue is a simple reclassification of reserves which causes an increase in the share capital of the company on the one hand and an equal decrease in other reserves.I understand that no entry has to be passed on receipt of bonus shares.The account can also be used in the issuance of bonus shares and for costs or expenses related to this issuance.Do not make any entry in Source (consumption).Here you can enter name of the company, bonus shares (Qty).Bonus shares are issued to each shareholder according to their stake in the company.Un-appropriated profits) are used to account for a bonus issue, it decreases the risk to creditors as it reduces the amount of reserves available for distribution to the shareholders of the company.So we adjust the proportionate number of shares outstanding as if the bonus issue had occurred at the beginning of the earliest period presented.Originally posted by : Jayapalan Nair.
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Why does a company issue bonus shares?
So why we cannot treat it as a gain/Income?
Income from Bonus share is realised only when you sale an investment.
Reply, velu, cA Practice 41, in opening screen go to Transactions - Inventory Vouchers - Now you will get Transfer of Material screen.
Reply, dear Sir, I want to know how can I increase the quantity of shares without accounting for it by account entry on receipt of the bonus shares.Investing, financial Analysis, what is a Share Premium Account.Anticipated profits cannot be recognised in books of account.Credit, share Capital Account, number of bonus shares nominal value of 1 share.The share premium account is usually utilized to pay off equity expenses, which include underwriter fees.However, in the later portion of the two-year period, winning slot videos the company experiences a surge in the market.This would cause your EPS figure to halve overnight, leading investors and creditors into a wild and frenzied panic as they think your company is going down the tubes.For example, a 3 for 2 bonus issue would entitle each shareholder 3 shares for every 2 shares already held by them before the issue.