Asked by: Makhan Hudabirdinbusiness and finance mergers and acquisitions
What are the sources of bonus issue?
Last Updated: 12th May, 2020
- Profit and loss account.
- general reserve.
- revenue reserve.
- free reserves.
- dividend equalization fund.
- capital reserve.
- sinking fund.
- debenture redemption reserve only after redemption.
Click to see full answer.
Similarly, it is asked, how does bonus issue work?
A bonus issue is a stock dividend, allotted by the company to reward the shareholders. The bonus shares are issued out of the reserves shares of the company. By issuing bonus shares, the number of outstanding shares increases, but the value of each share reduces .
Also Know, what is the benefit of bonus issue? Advantages of Bonus Shares from Company's Point of View Increasing the number of outstanding shares through a bonus issue increases the participation of smaller investors in the company's shares and hence enhances the liquidity of the stock.
Additionally, how is bonus share issued?
Bonus shares are issued by cashing in on the free reserves of the company. The assets of a company also consist of cash reserves. A company builds up its reserves by retaining part of its profit over the years (the part that is not paid out as dividend).
What do you mean by bonus share what are the various sources from which these are issued?
Source of Bonus Issue: Fully paid-up bonus shares can be issued out of following sources: (i) Capital redemption reserve. (ii) Security premium** (realised in cash) (iii) Capital reserve* (realised in cash) (iv) Profit and loss account.