Accounting for

2
Issue
Bonus and Rights
o o etig Bonus Shares

Introduction
shareholders on a pro-rata basis. A
by a company free of cost to its existing
Bonus shares are shares issued decides to capitalise a part ofthese reserves by issuing
company that has built up substantial reserves sometimes to pay anything. AIl successful
having
without the shareholders
bonus shares to existing shareholders, shareholders from the reserves
when
by giving free shares to its existing
companies increase their capital base by law or as a matter of financial prudence, be
reserves which cannot, either of
there are large accumulated shares are created by the conversion retained
cash to shareholders. Since bonus
distributed as dividends in of fund
issue of bonus shares does not represent a source
equity share capital,
earnings or other reserves into of cash.
is no inflow
It means that there section of the
to the company. Funds'does not change and, the assets
given, the 'Shareholders'
When bonus shares are by the
"Equity and Liabilities' section, the reserves are reduced
BalanceSheetremains unaffected. On the in this way no longer become available
Reserves capitalised
amount ofthe increase in the equity share capital.
are primarily no better-off as a result of bonus
issue,
for distribution as dividends. In principle, shareholders
vlue ofthe company remains unaffected.
This is because the total
though no cash is paid to acquire these shares.
is increased by a bonus issSue.
although the number of shares held by a shareholder
has the following capital structure:
For exanple, a company
of 10 each oiaso 10,00,000
1,00,000 Equity Shares
Securities Premium Account
1,00,000

Profit and Loss Account ontoe 5,00,000

2.2 Accounting for Bonus and Rights Issue

make a bonus issue on new shaa

for 4 basis (the shareholders will receive one
The company decides to 1

of Securities Premium Account and Profit and Loe

for every four existing shares they own) by making use

Account. Therefore, the company requires 2,50,000 1,00,000 from Securities Premium( Account and

of? 10 each (1/4th of existing 1,00.000

?1,50,000from Profit andLoss Account) to issue 25,000 bonus shares
shares).
After the bonus issue, the capital structure of the company will appear as below: ?
12,50,000
1,25,000 Equity Shares of 10each
Profit and Loss Account 3,50,000

After the issue ofbonus shares, the market price of share will drop initially depending upon the bonus ratio.
Research studies have concluded that the reduction in actual market price is not exactly in proportion to the

size thebonus issue.For

of a 3: 1 bonus issue, the ex-bonus market price would definitely not become

one-fourth of its current price.

A bonus issue has two implications :
First, it increases the number of shares available for trade.
Second,it signals the management'sconfidence in accelerating or at least maintaining the profit growth.
This is because, while nothing may have changed for the shareholders, the company hasto henceforth pay cash
dividend on a higher equity base.Therefore, itis has to generate more cash in the future. The signal is, therefore,
stronger.

Objects of Bonus Shares Issue

Bonus by a company for the following reasons :

shares are issued
1. The management may opt for an issue of bonus shares in order to increase the paid-up capital.
2. By issue of bonus shares the cash resources of the company are conserved. When a new project is
it may be prudent
under implementation which may take a few years to start giving increasing returns,
to wait till the project is completed and increased returns start coming.
3. Issue of bonus shares will reduce the chance oftake-over bids.
4. Issue ofbonus shares is an indication to the investors that the company has good prospects.
5. Issue ofbonus shares an inexpensive method of raising capital base of the company.
is

6. Issue ofbonus shares reduces the market price of the shares,thus rendering them more marketable.

in the future earning potential of the firm.

7. It indicates management'sconfidence

8 To make stock options more attractive and retain the good talent.

Advantages of the Issue of Bonus Shares

The following are the advantages of issue of bonus shares
1. Bonus shares help unlock shareholders' wealth. The shareholders get back their undistributed profit
in the shapeof shares.
2. Company can keep its shareholders happy without impairing the financial position and liquidity of
the company.
3. The security of the creditors will increase owing to increase in share capital.
4. It willincrease the number of shares in the hands of existingsharcholders without any extra payment,

thus it will increase the marketability ofshares.

5. No tax is payable by the company or the shareholder.
Disadvantages of the lssue of Bonus Shares
The following are the disadvantages of issue of bonus shares:
Issue of bonus shares would increase the cash dividend for the future. Therefore,the dividendin
rate of future
1.

will decline sharply, which may create confusion in the minds

of the investors.

2. It will encourage speculative dealings in the company's shares.

3. Prior approval of the SEBI must be obtained before the bonus issue. The lengthy procedures,

sometimes, may delay the issue of bonus shares.

4. Per Share (EPS)
Earning will fall if there is no corresponding increase in earnings.
2.3
Corporate Accounting

Issue of Bonus Share Under Companies Act, 2013

In the Companies Act, 1956, there was no specific provision for issue of bonus shares. At that time, the SEBI
Guidelines /Regulations used to govem the issue of bonus shares. However,the Companies Act, 2013 has
provided Section 63 for issue ofbonus shares. This section states that :
(1) A company may issue fully paid-up bonus shares to its members,in any manner whatsoever, out of

) its free reserves;

(ii) the securities premium account; or
(ii) the capital redemption reserve account.
Provided that no issue of bonus shares shall be made by capitlising reserves created by the revaluation

of assets.
paid-up bonus shares
(2) Nocompany shallcapitalise its profits or reserves for the purpose ofissuing fully

under sub-section (1), unless-

(a) it is by its articles;
authorised
of the company;
on the recommendationof the Board, been authorised in the general meeting
(b) it has,
of fixed deposits or debt securities
(c) it has not defaulted in paymentof interest or principal in respect
issued by it;
(d in respect of the payment of statutory
dues of the employees, such as,
it has not defaulted

contribution to provident fund, gratuity and bonus;

outstanding on the date of allotment, are
made fully paid-up;
(e) the partly paid-up shares, if any,
() it complies with such conditions as may be prescribed.
(3) The bonus shares shall not be issued in lieu ofdividend.
be required to comply
It is to be noted that a listed
company, in addition to the aboveprovisions, shall also
2009*. It provides that a
Disclosure Requirements) Regulations,
with the SEBI (Issue of Capitaland
listed

issuer may issue bonus shares to its

members if:
for issue of bonus shares, capitalisationof
reserves,
(a) it is authorised by its articles of association
etc.
issuer shall pass a
Provided that if there no such provision in the articles of association, the
is
in the aticles of associations for
resolution at its general body meeting making provisions

capitalisation ofreserve; securities

in payment ofinterestor principal in respect offixed deposits or debt
(b) it has not defaulted
issued by it;
of the payment of statutory
(c)it has sufficient reason
to believe that it has not defaulted in respect
to provident fund, gratuity
and bonus;
dues ofthe employees such as contribyution
if any outstanding on the
date ofallotment, are made fully paid-up.
(d) the partly paid shares,
Restriction on Bonus Issue of equity shares
unless it has made reservation
(1) No issuer shall make a bonus issue of equity shares debt instruments.
outstanding compulsorily convertible
ofthe sameclass in favour of the holders of
part thereof.
to the convertible shall be
ifany,in proportion
the holders of fully or partly convertible debt instruments
(2) The equity shares so reserved for on the same terms or same
issued at the time of conversion
of such convertible debt instruments
bonus shares were issued.
proportion at which the
in Cash
Reserves, etc. if Capitalised
Bonus Shares only against out of the genuine profits or securities
(1)) The bonus issue shall be made out of free reserves built
shall not be
created by revaluation of fixed assets
premium collected in cash only and reserves
capitalised for the purpose
of issuing bonus shares.
(1),the bonus share shall not be issued in
lieu
(2) Without prejudice to the provisions ofsub-regulation
of dividend.

*Asamendedupto 25th April, 2015

Corporate Accounting 2.5
In this case, "Securities
Premium' has not been
issue. received in cash. Therefore, it can not be used for bonus
Free reserves can also be
used for issue of bonus shares, Section
defined 'FreeReserves'as 2(43) ofthe Companies Act, 2013
follows : has
"Free reserves means such
reserves which asper the latest
for distribution as dividend : audited Balance Sheetofa
company,are available
Provided that
() any amountrepresenting unrealised
gains, notional gains or
a reserve or otherwise, or revaluation ofassets, whatever shown as
(i) any change in carrying amount of an asset or of a
liability recognised in equity, including surplus
Profit and Loss Account on in
measurementof the asset or the liability at fair
shall not be treated as free value;
reserves."

Prior Action Regarding Bonus

Issue
1. The Board of Directors will fix the Record Date and
inform the Stock Exchange42 days in advance.
2. The approval of the regional office of the RBI must be
obtained before allotment of bonus shares to
non-resident shareholders.
3 A general notice shall be givenas per the provisions of the Companies Act, 2013.

Points to be Noted
1.Partly paid-up shares, if any,are to be made fully paid-up before allotment of
bonus shares.
2. Bonus sharescan be issued in the ratio more than 1:1. (Seethe list of companiesin
the previous page)
3. Capital Redemption Reserveshall be used first.
4. Securities Prenium not collected in cash can not be used for issuing ofbonus shares.
5. Bonus sharesshallnot be issued in lieu ofdividend.
6.No issue of bonus shares shall be made out of reserves created by the revaluation theassets. of

7.It makes no senseto issue bonus shares at apremium. Inpractice, no company is doing this.

Accounting Entries
(a) Capital Redemption ReserveAccount Dr.
Securities Premium Account Dr.
Other Reserves Account etc. Dr.

To Bonus to Shareholders Account

Dr.
(b) Bonus to Shareholders Account
To Equity Share Capital Account
Illustration 1
Jayanti Ltd.has an authorised capital of 8,00,000 in equity shares of? 100each of which 4,000 shares were issued to the

shares are to be shareholders as

public in 2010. It is decided on 1st April, 2017 that 1,000 unissued
issued to the existing

the company's Reserve Fund amounting to 5,00,000 should be utilised in this

fully paid bonus shares and a part of

recording the above transactions related to bonus issue.

connection. You are required to give journal entries,

Solution In the books of Jayanti Ltd.

Journal Dr. Cr.

Particulars
Date
Dr 1,00,000
2017 Reserve Fund Alc
1,00,000
April 1 ToBonus to Shareholders Alc by general
as per Board's Resolution No. ...dated ...as confirmed
(Being bonus declared out of Reserve Fund
meeting resolution no. ...dated
...)
1,00,000
Dr
Bonus to Shareholders Alc
1,00,000
ToEquity Share Capital Alc

(Being issue of 1,000 equity shares

of ? 100 each as per Board's Resolution No. dated ..)
and Rights Issue
2.6 Accounting for Bonus

to utilise the bo

Illustration 2
subscribed capital of* 10,00,000 in equity shares of? 10 each has resolved
of one equity share
for every five equity
ee
A limited companywith a fully paid bonus shares in the
ratio
to issue
of Securities
Premium Account
held.
entries in the books of the company.
Show joumal
Solution
company = 10,00,000 +10 =1,00,000 shares.
shares will be :
The number of equity
shares of the
held. Therefore, total number of bonus
for every five shares
will be given
One bonus shares
1.00,000 xl =20,000 shares
5
bonus = 20,000x 10= 2,00,000.
Amount of
Company
In the books of the
Dr. Cr.
Journal

Particulars
Dr. 2,00,000
Date
Securities Premium A/c 2,00,000

To Bonus to Shareholders A/c

as confirmed by
No....dated..
of Securities Premium as per Board's Resolution
(Being bonus declared out
resolution no.... dated ..)
general meeting 2,00,000

Dr
Bonus to Shareholders Alc
2,00,000

To Equity Share Capital Ac

dated.)
equity shares of 10 each as per Board's Resolution No....
(Being issue 20,000
of
Illustration 3
March, 2017
BalanceSheet of X Co. Ltd. as at 31st
Note Amount
No.
Particulars

(2) (3)
(1)

LEQUITY AND LIABILITIES

(1)Shareholders' Funds :
(1) 1,50,000
(a) Share Capital
1,25,000
(2)
(b) Reserves and Surplus

(c) Money FReceived against Share Warrants

(2) Share Application Money Pending Allotment:

Liabilities:
(3) Non-current

(4) Current Liabilities :

(a) Short-term Borrowings
25,000
(b) Trade Payables

3,00,000
TOTAL

ILASSETS

(1) Non-current Assets:

(a) Fixed Assets

0 Tangible Assets-Plant and Machinery

1,80,000
10.000
(0) Intangible Assets-Goodwil

(2) Current Assets :

(a) Current Investments 10,000

(b) Inventories 50,000

(c) Trade Receivables 40,000

()Cash and Cash Equivalents 10,000

TOTAL 3,00,000
Corporate Accounting 2.7

Notes to Accounts:
(1) Share Capital
(2) Reserve and Surplus
Particulars
Particulars

Authorised Capital : Securities Premium 20,000

25,000 Equity Shares ofR 10 each 2,50,000General 60,000
Reserve

Issued, Subscribed and Paid-up Capital: Profit and Loss Account 45,000

15.000 Equity Shares of 10 each fully paid 1,25,000

1,50,000

On 1st April, 2017, the companyin its general meeting decided to issue bonus shares at the ratio of 2:5.It was also
decided to utilise the following for this purpose :
i) Securities premium to the full extent.
(ii) 720,000 out of general reserves.
(iii) Balance out of Profit and Loss Account.
Give journal entries to incorporate the above decisions.

Solution
The ratio of bonus shares is 2:5. It means 2bonus shares will be given for 5shares held. Therefore, total number of bonus shares will
be issued:
15,000
x 2 =6,000 shares.
(a) Amountrequired for bonus issue = 6,000 x* 10 - 60,000.

(b) Amount to be utilised :

Securities Premium 20,000

General Reserve 20,000

Profit and Loss (Balancing figure) 20,000 60,000

In the books of X Co. Ltd.

Dr. Cr.
Journal

Date Particulars
20,000
Dr
2017 Securities Premium A/G
20,000
General Reserve Alc
April 1
Dr 20,000
Profit and Loss Alc
60,000
To Bonus to Shareholders A/c
General Reserve and Profit and Loss Account as per
(Being bonus declared out of Securities Premium,
meeting resolution no. dated ..)
No...dated as confirmed by general
Board's Resolution
...
Dr 60,000
Bonus to Shareholders Alc
60,000
To Equity Share Capital Alc
No.... dated...J
10 each as per Board's Resolution
(Being issue of 6,000 equity shares of

Illustration 4
Cosmetics Ltd as on 31st March, 2017.
The following was the Balance Sheet of Abhishek

as at 31 st March, 2017
Balance Sheet of Abhishek Cosmetics Ltd.
Note Amount
No.
Particulars

(1) (2) (3)

EQUITY AND LIABILITIES

L.
(1) Shareholders' Funds: 4,00,000
(1)
(a) Share Capital 3,30,000
(2)
(b)Reserves and Surplus

against Share Warrants

(c)Money Received

Application Money Pending Allotment :

(2) Share

Non-current Liabilities :
3)
(4)Curent Liabilities :
(a)Short-term Borrowings 90,000
(b) Trade Payables
8,20,000
TOTAL
and Rights Issue
for Bonus
.8 Accounting

ASSETS 8,20,000
1.
Assets:
1) Non-current
(a) Fixed Assets
8,20,000
0 Tangible Assets

(2)Current Assets :
TOTAL
and Surplus
Notes to Accounts: (2)Reserve
Particulars

(1) Share Capital 1,40,000

Particulars Securities Premium

Reserve
General
Capital: 5,00,000
Authorised

50),000 Equity Shares of

R 10 each Profit and Loss Accountstur j 1,20,000

3,30,00
and Paid-up Capital :
Issued, Subscribed
4,00,000
fully paid will be utilised
40,000 Equity Shares
of 10 each
Securities Premium Account
shares.
every four fully paid-up
issued one bonus share for
The company
Entries and
Balance Sheet.
Show Journal Ltd
books of Abhishek Cosmetics 8de
first.
In the Dr. Cr.
Solution Journal

Date
Particulars

Dr. 2reli 1,00,000 (

Securities Premium Alc 1,00,000
1)
To Bonus to Shareholders AWc (Note by
.. dated...as confirmed
in the ratio of 1 :4 as per Board's Resolution No.
the decdaration of bonus
(Being

General Meeting resolution No..

dated ..)
1,00,000
Dr.
Bonus to Shareholders Alc
1,00,000
To Equity Share Capital Ac
.. dated ..)
shares of 10 each as bonus as per Board's Resolution No.
(Being issue of 10,000 equity

Cosmetics Ltd. as at 31st March, 2017

Balance Sheet of Abhishek
Note OD Amount
No.
Particulars

(2) Dso (3)

(1)

L EQUITY AND LIABILITIES

(1) Shareholders' Funds:

5,00,000
(a) Share Capital (1)

(b)Reserves and Surplus (2) 2,30,000

(c)Money Received against Share Warrants

(2) Share Application Money Pending Allotment:

(3) Non-current Liabilities:

(4)Current Liabilities :
(a)Short-tem Borrowings

(b) Trade Payables 90,000

TOTAL
alabloi 8,20,000
ASSETS
IL.
(1)Non-current Assets : es()
(a)Fxed Assets

(0 Tangible Assets
8,20,000
(2)Current Assets:

TOTAL

Note : (1) One bonus share will be given for every four shares held.
8,20,000

Therefore, number bonus shares

of
=40.000/4=10,000 STa
Corporate Accounting 2.9

Notes to Accounts:

(1) Share Capital (2) Reserve and Surplus

Particulars
Particulars

40,000
Authorised Capital: Securities Premium
R 10 each 70,000
50,000 Equity Shares of 5,00,000 General Reserve
1,20,000
IsSued, Subscribed and Paid-up Capital : Profit and Loss Account

2,30,000
50,000 Equity Shares ofR 10 each (incuding 10,000 5,00,000

shares issued as bonus)

Illustration 5
The Balance Sheet of Kartik Ltd. as on 31st March, 2015 is given below

:
L EQUITY AND LIABILITIES
Balance Sheet of Kartik Ltd.

Particulars

(1
as at 31st March,2017
Note

No.

(2)
)
Amount

(3)

()Shareholders' Funds :
10,00,000
(1)
(a) Share Capital
5,00,000
(b) Reserves and Surplus-GeneralReserve
(c)Money Received against Share Warrants

(2) Share Application Money Pending Allotment :

(3)Non-current Liabilities :
2,00,000
(a) Long-term Borrowings -12% Debentures
(b) Deferred Tax Liabilities (Net)

(c)Other Long-term Liabilities

(d) Long-tem Provisions

(4) Current Liabilities

:
20,00,000
(a) Short-tem Borrowings
20,00,000
(b) Trade Payables 5,00,000
Liabilities
(c) Other Current

(d) Short-term Provisions

62,00,000
TOTAL
ASSETS
IL.
(1)Non-current Assets
:
(a) Fixed Assets 27,50,000
(2)
() Tangitble Assets

(ü) Intangible Assets

(iü) Capital Work-in-progress

(iv) Intangitble Assets under Development

(b) Non-current Investments

(c) Deferred Tax Assets (Net)

(d) Long-term Loans and Advances

(e) Other Non-current Assets

(2)Curent Assets: 4,50,000

la) Current Investments 5,00,000
(b) Inventories 10,00,000
(c)Trade Receivables 5,00,800
(d)Cash and Cash Equivalents
5,00,000
(e) Short-term Loans and Advances
5,00,000
() Other Current Assets
62,00,000
TOTAL
e.10 Accounting for Bonus and Rights Issue

Notes to Accounts:
(1) Share Capital (2)Fixed Assets
Particulars
Particulars

Authorised Capital: (a) Tangible Assets :

20,00,000 Land andBuilding
2,00,000 Equity Shares of & 10 each 7,50,000

Issued, Plant and Mchinery 12,00,000

Subscribed and Paid-up Capital:

10,00,000Fumiture and Fittings 8.00,000

1,00,000 Equity Shares of 10 each
27,50,00

At the shareholders'meeting on Ist July.2017 of the company it was decided to adopt the following schemes :
shares of? 10 each.
1) The authorisedcapital was increaesd to 2,50,000 equity
the ratio of two fully paid-up equity shares of 10 eack
(i) A bonus issue was made to the existing shareholders, at
for every five shares held.
and show the Balance Sheet.
You are required to pass necessary journal entries

Solution
Number ofBonus Shares to be issued 1,00,000
5 x 2 =40,000 Equity Shares

In the books of Kartik Ltd

Journal Dr. Cr.

Particulars
Date
Dr. 4,00,000
2017 General Reserve Ac
4,00,00
To Bonus to Shareholders Alc
July 1
(Being the dedaration of bonus the of 2:5as per Resolution No. .. dated
...)
in ratio

Dr. 4,00,000
Bonus to Shareholders Alc
4,00,000
To Equity Share Capital Alc

(Being the issue of 40,000 equity shares as bonus as per Board's Resolution No...dated..)

Balance Sheet of Kartik Ltd. as at 1st July,2017

Note Amount

No.
Particulars

(2) (3)
(1)

LEQUITY AND LIABILITIES

(1)Shareholders Funds :
14,00,000
(1)
(a)Share Capital
1,00,000
(2
(b)Reserves and Surpius

(c) Money Received against Share Warants

(2) Share Application Money Pending Allotment:

(3)Non-current Liabilities :
2.00,000
(a) Long-tem Borrowings

(b) Deferred Tax Liabifties (Net)

() Other Long-4erm Liabilities

(0) Long-em Provisions

(4) CurentLiabilities :
20,00,000
(a) Short-Mem Borowings
(b) Trade Payables 20,00,000

(c) Other Current Liabilities 5,00,00

(d) Short-tem Provisions

TOTAL 62,00,000

LASSETS
(1) Non-current Assets :
(a) Fixed Assets

0 Tangible Assets
(3)
27,50,000

intangible Assets
(@Capital Work-in-progress
() Assets under Development
Intangible
Corporate Accounting 2.11

(b) Non-curent Investments

(c) Deferred Tax Assets (Net)

(d) Long-tem Loans and Advances

(e) Other Non-current Assets

(2) Current Assets :

(a) Current Investments 4,50,000

(o) Inventoies 5,00,000

(c) Trade Recaivables 10,00,000

5,00,000
(d) Cash and Cash Equivalents
(e) Short-tem Loans and Advances 5,00,000
5,00,000
(0Other Curent Assets
62,00,000
TOTAL

Notes to Accounts:
()Share Capital (2) Reserve and Surplus
Particulars Particulars

1,00,000
Authorised Capital: General Reserve (5,00,000-4,00,000)

2,50,000 Equity Shares of 10 each 25,00,000

Issued, Subscnibed and Paid-up Capital :

1,40,000 Equity Shares of R 10 each fully paid 14,00,000

(Out of the above, 40,000 equity shares have been

issued as bonus shares)

Illustration 6
The Balance Sheet of A Limited as at 31.3.2017 is as follows :
Balance Sheet ofA

Particulars

(1)
Limited as at 31st March, 2017.
Note
No.

(2)
)
Amount

(3)

L EQUITY AND LIABILITIES

(1) Shareholders' Funds : 6,00,000
(1)
(a) Share Capital
(2) 11,00,000
Reserve
(b) Reserves and Surplus-General

against Share Warrants

(2) Share
(c)Money Received

Application Money Pending Allotment :

(3) Non-current Liabilities :
(4)Current Liabilities :
(a)Short-lerm Borrowings
3,00,000
(b)Trade Payables

(c)Other Current Liabilities

(d) Short-tern Provisions

20,00,000
TOTAL
ASSETS
IL.
(1) Non-current Assets:
(a)Fixed Assets 17,00,000
Tangible Assets
(0)
(2)Current Assets :
(a)Current Investments

(b)Inventories
1,00,000
(c) Trade Receivables
2,00,000
(d) Cash and Cash Equivalents
20,00,000
TOTAL
2.12 Accounting for Bonus and Rights Issue

Notes to Accounts :
Share Capital
(1) (2) Reserve and Surplus

Particulars
Particulars

Authorised Capital: Capital Redemption Reserve

1,50,000
1,50,000 Equity Shares of 10 each Plant Revaluation Reserve
15,00,000
20,000
Issued, Subscribed and Paid-up Capital Securities Premium (R 50,000 was not received in cash)
150,000
:
80,000 Equity Shares 10 each, 7.50 paid-up 6,00,000 Development Rebate Reserve
of
2,30,000
Investment Allowance Reserve
2,50,000
General Reserve
3,00,000

11,00,000

The Company wanted to issue bonus shares to its shareholders @ one share for every two shares held. Necess

resolutions were passed; requisite legal requirements were complied with.

You are required to :
(a)Give effect to the proposalby passing Journal Entries in the books of A Ltd on lst April, 2017;
(b) Show the amended Balance Sheet.

Solution In the books of A Ltd

Journal Dr. Cr.
Date Particulars

2017 Equity Share Final Call Alc [See Tutorial Note] Dr.
2,00,000
April 1 To Equity Share Capital Ac
2,00,000
(Being the final call money due on 80,000 shares @ 2.50 per share as per Board's Resolution
No. dated ..)
...
Bank Ac
To Equity Share Final Call A/c
Dr.s 2,00,000

2,00,000
(Being the final callmoney received for 80,000 shares)

Capital Redemption Reserve Alc Dr 1,50,000

Securities Premium Alc [See Tutorial Note) Dr.
1,00,000
General Reserve Alc
Dr.
To Bonus 1,50,000
to Shareholders A/c

(Being 1 bonus 4,00,000

share payable for 2shares held as per Shareholders' Resolution No.
dated.)
...
Bonus to Shareholders Ac
Dr.
To Equity Share 4,00,000
Capital Alc

(Being issue of 40,000 4,00,000

shares of 10 each as bonus as per Board's Resolution No....
dated.)

BalanceSheetofA Ltd. asat 1st April, 2017

Particulars
Note Amount
No.
(1)
LEQUITY ANDLIABILITIES (2 (3
(1) Shareholders'
Funds:
(a) Share Capital

(b) Reserves and Surplus

(c)Money Received
against Share
(1) b 12,00,000

Warrants (2) 7,00,000

(2) Share
Application Money Pending Allotment:
(3) Non-curent
Liabilities :
(a) Long-4erm
Borrowings
(b) Deferred
Tax Liabilities (Net)
(c)Ofther
Long-term Liabilfities

(9) Long-lerm Provisions

Corporate Accounting 2.13
(4) Current Liabilities:

(a) Short-term
Borrowings
(b) Trade Payables

(c) Other Current 3,00,000

Liabilities

TOTAL
22,00,000
lL. ASSETSs

(1) Non-current Assets :

(a) Fixed Assets

0 Tangible Assets
17,00,000
(2) Current Assets :
(a) Current Investments

(b) Inventories

(c) Trade Receivables

1,00,000
(d) Cash and Cash Equivalents
4,00,000
TOTAL
22,00,000

Notes to Accounts:
(1) Share Capital
(2) Reserve and Surplus

Particulars Particulars

Authorised Capital : Plant Revaluation Reserve 20,000

1,50,000 Equity Shares of 10 each 2,30,000

15,00,000Development Rebate Reserve
Issued, Subscribed and Paid-up Capital : Investment Allowance Reserve 2,50,000

1,20,000 Equity Shares 10 each fully paid 12,00,000 Securities 50,000

Premium
of
(Out of the above, 40,000 equity shares have been General Reserve 1,50,000

issued as bonus shares) 7,00,000

()First,
2) Securities Premium
all

received in cash.
partly (Tutorial Notes

paid-up equity shares 7.50paid-up) are to be madefully paid-up.

to the extent of* 50,000can not be used forissuing bonus shares as it was not

Ilustration7
Balance Sheet of Bharat Shoe Co. Ltd. as on 31st March, 2017:
The following is the abstract of

Issued and Paid-up Capital :

4,50,000
45,000 Equity Shares of? 10 each fully paid-up
10,000 4,40,000
(5,000 Equity Shares of 2 each)
Less: Calls-in-arrear

20,000 Equity Shares of 10 each,

:
cash paid-up 4 80,000

Reserves and Surplus

in cash) 30,000
Capital Reserves (realised
80,000
Capital Redemption Reserve
50,000
Securities Premium
30,000
Dividend Equalisation Reserve
30,000
General Reserve
3,50,000
Profit and Loss Account

On Ist April, 2017, the Board of Directors of the company decided:

of 2 each is due:
(a) to forfeit the shares on which
final call

(b) to re-issue the forfeited shares

(@12
each as fully paid-up;
fully paid shares held; and
issue paid bonus shares@ one fully paid bonus shares for every two
(c) to fully
and Loss Account.
(d) to use minimum balance of Profit

of the company on the basis of the above decisions.

Pass necessary journal entries in the books