Bonus Share

What do you mean by Bonus Shares & Right Shares?
BONUS SHARES Bonus issue means a issue of free additional shares to existing
shareholders A company may issue fully paid-up bonus shares to its shareholders out
of— (i) its free reserves; (ii) securities premium account; or (iii) capital redemption
reserve account: Bonus shares should not be issued out of revaluation reserves (i.e.,
reserves created by the revaluation of assets)
RIGHT ISSUE Rights issue is an issue of rights to a company's existing shareholders
that entitles them to buy additional shares directly from the company in proportion to
their existing holdings, within a fixed time period.
C.U YEAR QUESTION
1.The following is the abstracts of Balance Sheet of M2SLtd. as on 31.3.2021: Issued

and paid up capital: ₹ 20,000 Equity shares of ₹ 10 each fully paid up 2,00,000
Reserves and Surplus: Capital Redemption Reserve 40,000 Securities premium 30,000
General Reserve 1, 00,000 Profit & Loss Account 80,000 Revaulation Reserve 20,000
Development Rebate Resere 10,000 At the annual general meeting of the company the
following resolutions were passed: (i) To issue 2 bonus shares for every five shares hold
as on date; and (ii) To give existing shareholders the option to purchase three ₹ 10
Right shares at ₹ 14 per share for every five shares held before the issue of bonus
shares. All the shareholders took up the option of right shares and bonus shares were
dully allotted. Show appropriate journal entries to record the above transactions in the
books of M2S Ltd.
2. M2S Ltd. provides the following information as on 31.03.2021 :

Particulars ₹
1,20,000 equity shares of ₹ 10 each fully paid 12,00,000
Capital Redemption Reserve 3,00,000
Plant Revaluation Reserve 40,000
Securities Premium 3,00,000
Development Rebate Reserve 4,60,000
Investment Allowance Reserve 5,00,000
General Reserve 6,00,000
On 01.04.2021, the company decided to issue Bonus shares at par to its shareholders at
the rate of 1 share for every 2 shares held and right shares at the rate of 1 share for
every 4 shares held at ₹ 14 per shares. Show necessary Journal entries in the books of
M2S Ltd. to give effect to above transactions.
3.M2S Ltd. has a Share Capital of ₹ 7,00,000 in equity shares of ₹ 10 each fully paid up
which are quoted in the Stock Market at ₹ 18 each. The company declares a bonus of ₹
6,00,000 each out of its reserves in the form of fully paid equity shares of ₹ 10 each
to be issued at a premium of ₹ 5 per shares. Show journal entries for the above
transactions. [No. of Bonus Shares 40,000]
4.Following is the extracts of Balance sheet of M2S Limited as on 31.03.19:

Share capital: 12,000,
12% preference shares of ₹ 10 each fully paid ₹ 1,20,000
80,000 Equity Shares of ₹ 10 each fully paid ₹ 8,00,000
Reserve and Surplus
Capital Redemption Reserve ₹ 2,50,000
Securities Premium ₹ 1,00,000
Revaluation Reserve ₹ 1,50,000
General Reserve ₹ 1,00,000
Profit and loss balance (Cr.) ₹ 3,00,000
Company has decided in its General Meeting to capitalize its reserve by issue of 1 fully
paid bonus share for every 2 equity shares held after fulfilling the legal formalities.
Pass the journal entries to give the effect of the above decision
5. The authorised capital of M2S Ltd. is 15,000 Equity Shares of ₹ 10 each. Out of
which 8,000 Equity Shares of ₹ 10 each are fully paid – up and 2,000 Equity Shares of
₹ 10 each have been called and paid – up ₹ 7 per shares. The company has the following
Balances:
Securities Premium, General Reserve & Profit & Loss (Cr.) 5,000 ;18,000 &47,500
The company has decided in a general meeting to capitalise Securities Premium and
General Reserve in full and part of the Profit & Loss Account is necessary for this
purpose by issuing: (i) Bonus on the partly paid – up shares in order to make them fully
paid – up; and (ii) One bonus share at a premium of ₹ 2 for every two fully paid Equity
Shares held. Show the Journal entries to record the transactions. [ANS. Fund needed
for fully paid – up Bonus shares ₹ 48,000 and for partly paid – up Bonus Shares ₹
6,000.]
6.M2S Ltd. had ₹ 12,00,000 in Capital Redemption Reserve, ₹ 10,00,000 in Securities

Premium and ₹ 15,00,000 credit balance in its Statement of Profit & Loss. It issued
20,000 bonus shares of ₹ 100 each as fully paid at par and 5,000 right shares of ₹ 100
each fully paid at ₹ 125 to its shareholders. A. Ltd. received 1,200 such bonus shares
and entitled to 300 right shares, which it accepted. Show necessary journal entries
(without narrations) in the books of Ex Ltd. and in the books of A Ltd. for the above.
The share capital of Gold Ltd. consists of 20,000 Equity Shares of ₹ 10 each, ₹ 7 per
share paid up. The following balances are shown in its ledger :
Profit & Loss Appropriation A/c ₹ 50,000 (credit).
General Reserve A/c ₹ 12,000.
Securities Premium A/c ₹ 10,000.
The Company has decided in the General Meeting to capitalise the necessary parts of
the above balances by paying a bonus of ₹ 3 per share to make partly paid shares fully
paid. Show entries in the Journal Proper of the Company to give effect to the above
transaction. [Fund required for Partly-paid Bonus ₹ 60,000]
7.A Company's Share Capital consists of 20,000 shares of ₹ 100 each, ₹ 75 paid. It has
₹ 15,00,000 in the Reserve Fund. The Directors recommended the following with a view
to capitalizing the reserve: (a) the existing shares be made fully paid without the
shareholders having to pay anything. (b) each shareholder to be given (Proportionate to
his holdings) bonus shares for the remaining amount, the shares to be valued at ₹ 125.
Assuming that the scheme is accepted and that all legal formalities are gone through,
give Journal entries and show in what proportion Bonus Shares will be distributed
among the shareholders. [Fully paid Bonus Shares issued at a premium of ₹ 25; No. of
fully paid Bonus Shares 8,000]

Bonus Share

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What do you mean by Bonus Shares & Right Shares?

C.U YEAR QUESTION

1.The following is the abstracts of Balance Sheet of M2SLtd. as on 31.3.2021: Issued

2. M2S Ltd. provides the following information as on 31.03.2021 :

4.Following is the extracts of Balance sheet of M2S Limited as on 31.03.19:

6.M2S Ltd. had ₹ 12,00,000 in Capital Redemption Reserve, ₹ 10,00,000 in Securities

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