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Page 1
Accounting for Bonus Issue and Right Issue
Q-1 Following is the extract of the Balance Sheet of Xeta Ltd. as at 31st March, 2017
Rs.
Authorised capital:
50,000 12% Preference shares of Rs.10 each 5,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
45,00,000
Issued and Subscribed capital:
24,000 12% Preference shares of Rs.10 each fully paid 2,40,000
2,70,000 Equity shares of Rs.10 each, Rs.8 paid up 21,60,000
Reserves and surplus:
General Reserve 3,60,000
Securities premium 1,00,000
Profit and Loss Account 6,00,000
On 1st April, 2017, the Company has made final call@ ` 2 each on 2,70,000 equity shares. The call money was
received by 20th April, 2017. Thereafter, the company decided to capitalize its reserves by way of bonus at
the rate of one share for every four shares held.
Show necessary journal entries in the books of the company and prepare the extract of the balance sheet as
on 30th April, 2017 after bonus issue.
Ans. Journal Entries in the books of Xeta Ltd. Rs. Rs.
1-4-2017 Equity share final call A/c Dr. 5,40,000
To Equity share capital A/c 5,40,000
(For final calls of Rs.2 per share on 2,70,000 equity shares
due as per Board's Resolution dated....)
20-4-2017 Bank A/c Dr. 5,40,000
Dr. To Equity share final call A/c 5,40,000
(For final call money on 2,70,000 equity shares received)
Securities Premium A/c Dr. 1,00,000
General Reserve A/c Dr. 3,60,000
Profit and Loss A/c Dr. 2,15,000
To Bonus to shareholders A/c 6,75,000
(For making provision for bonus issue of one
share for every four shares held)
Bonus to shareholders A/c Dr. 6,75,000
To Equity share capital A/c 6,75,000
(For issue of bonus shares)
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Page 2
Accounting for Bonus Issue and Right Issue
Q-1 Following is the extract of the Balance Sheet of Xeta Ltd. as at 31st March, 2017
Rs.
Authorised capital:
50,000 12% Preference shares of Rs.10 each 5,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
45,00,000
Issued and Subscribed capital:
24,000 12% Preference shares of Rs.10 each fully paid 2,40,000
2,70,000 Equity shares of Rs.10 each, Rs.8 paid up 21,60,000
Reserves and surplus:
General Reserve 3,60,000
Securities premium 1,00,000
Profit and Loss Account 6,00,000
On 1st April, 2017, the Company has made final call@ ` 2 each on 2,70,000 equity shares. The call money was
received by 20th April, 2017. Thereafter, the company decided to capitalize its reserves by way of bonus at
the rate of one share for every four shares held.
Show necessary journal entries in the books of the company and prepare the extract of the balance sheet as
on 30th April, 2017 after bonus issue.
Ans. Journal Entries in the books of Xeta Ltd. Rs. Rs.
1-4-2017 Equity share final call A/c Dr. 5,40,000
To Equity share capital A/c 5,40,000
(For final calls of Rs.2 per share on 2,70,000 equity shares
due as per Board's Resolution dated....)
20-4-2017 Bank A/c Dr. 5,40,000
Dr. To Equity share final call A/c 5,40,000
(For final call money on 2,70,000 equity shares received)
Securities Premium A/c Dr. 1,00,000
General Reserve A/c Dr. 3,60,000
Profit and Loss A/c Dr. 2,15,000
To Bonus to shareholders A/c 6,75,000
(For making provision for bonus issue of one
share for every four shares held)
Bonus to shareholders A/c Dr. 6,75,000
To Equity share capital A/c 6,75,000
(For issue of bonus shares)
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Extract of Balance Sheet as at 30th April, 2017 (after bous issue)
Rs.
Authorised Capital
50,000 12% Preference shares of Rs.10 each 5,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
Issued and subscribed capital
24,000 12% Preference shares of Rs.10 each, fully paid 2,40,000
3,37,500 Equity shares of Rs.10 each, fully paid 33,75,000
(Out of above, 67,500 equity shares @ ` 10 each were issued by wayof bonus)
Reserves and surplus
Profit and Loss Account 3,85,000
Q-2 Following is the extract of the Balance Sheet of Xeta Ltd. as at 31st March, 2017:
Rs.
Authorised capital:
50,000 12% Preference shares of Rs.10 each 5,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
45,00,000
Issued and Subscribed capital:
24,000 12% Preference shares of Rs.10 each fully paid 2,40,000
2,70,000 Equity shares of Rs.10 each, Rs.8 paid up 21,60,000
Reserves and surplus:
General Reserve 3,60,000
Securities premium 1,00,000
Profit and Loss Account 6,00,000
On 1st April, 2017, the Company has made final call @ Rs.2 each on 2,70,000 equity shares. The call money
was received by 20th April, 2017. Thereafter, the company decided to capitalize its reserves by way of bonus
at the rate of one share for every four shares held.
You are required to give necessary journal entries in the books of the company and prepare the extract of
the balance sheet as on 30th April, 2017 after bonus issue.
Ans. Journal Entries in the books of Xeta Ltd.
Rs. Rs.
1-4-2017 Equity share final call A/c Dr. 5,40,000
To Equity share capital A/c 5,40,000
(For final calls of Rs.2 per share on 2,70,000
equity shares due as per Board's Resolution dated....)
20-4-2017 Bank A/c Dr. 5,40,000
To Equity share final call A/c 5,40,000
(For final call money on 2,70,000 equity shares received)
Securities Premium A/c Dr. 1,00,000
General Reserve A/c Dr. 3,60,000
Profit and Loss A/c Dr. 2,15,000
To Bonus to shareholders A/c 6,75,000
(For making provision for bonus issue of one
share for every four shares held)
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Page 3
Accounting for Bonus Issue and Right Issue
Q-1 Following is the extract of the Balance Sheet of Xeta Ltd. as at 31st March, 2017
Rs.
Authorised capital:
50,000 12% Preference shares of Rs.10 each 5,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
45,00,000
Issued and Subscribed capital:
24,000 12% Preference shares of Rs.10 each fully paid 2,40,000
2,70,000 Equity shares of Rs.10 each, Rs.8 paid up 21,60,000
Reserves and surplus:
General Reserve 3,60,000
Securities premium 1,00,000
Profit and Loss Account 6,00,000
On 1st April, 2017, the Company has made final call@ ` 2 each on 2,70,000 equity shares. The call money was
received by 20th April, 2017. Thereafter, the company decided to capitalize its reserves by way of bonus at
the rate of one share for every four shares held.
Show necessary journal entries in the books of the company and prepare the extract of the balance sheet as
on 30th April, 2017 after bonus issue.
Ans. Journal Entries in the books of Xeta Ltd. Rs. Rs.
1-4-2017 Equity share final call A/c Dr. 5,40,000
To Equity share capital A/c 5,40,000
(For final calls of Rs.2 per share on 2,70,000 equity shares
due as per Board's Resolution dated....)
20-4-2017 Bank A/c Dr. 5,40,000
Dr. To Equity share final call A/c 5,40,000
(For final call money on 2,70,000 equity shares received)
Securities Premium A/c Dr. 1,00,000
General Reserve A/c Dr. 3,60,000
Profit and Loss A/c Dr. 2,15,000
To Bonus to shareholders A/c 6,75,000
(For making provision for bonus issue of one
share for every four shares held)
Bonus to shareholders A/c Dr. 6,75,000
To Equity share capital A/c 6,75,000
(For issue of bonus shares)
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Extract of Balance Sheet as at 30th April, 2017 (after bous issue)
Rs.
Authorised Capital
50,000 12% Preference shares of Rs.10 each 5,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
Issued and subscribed capital
24,000 12% Preference shares of Rs.10 each, fully paid 2,40,000
3,37,500 Equity shares of Rs.10 each, fully paid 33,75,000
(Out of above, 67,500 equity shares @ ` 10 each were issued by wayof bonus)
Reserves and surplus
Profit and Loss Account 3,85,000
Q-2 Following is the extract of the Balance Sheet of Xeta Ltd. as at 31st March, 2017:
Rs.
Authorised capital:
50,000 12% Preference shares of Rs.10 each 5,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
45,00,000
Issued and Subscribed capital:
24,000 12% Preference shares of Rs.10 each fully paid 2,40,000
2,70,000 Equity shares of Rs.10 each, Rs.8 paid up 21,60,000
Reserves and surplus:
General Reserve 3,60,000
Securities premium 1,00,000
Profit and Loss Account 6,00,000
On 1st April, 2017, the Company has made final call @ Rs.2 each on 2,70,000 equity shares. The call money
was received by 20th April, 2017. Thereafter, the company decided to capitalize its reserves by way of bonus
at the rate of one share for every four shares held.
You are required to give necessary journal entries in the books of the company and prepare the extract of
the balance sheet as on 30th April, 2017 after bonus issue.
Ans. Journal Entries in the books of Xeta Ltd.
Rs. Rs.
1-4-2017 Equity share final call A/c Dr. 5,40,000
To Equity share capital A/c 5,40,000
(For final calls of Rs.2 per share on 2,70,000
equity shares due as per Board's Resolution dated....)
20-4-2017 Bank A/c Dr. 5,40,000
To Equity share final call A/c 5,40,000
(For final call money on 2,70,000 equity shares received)
Securities Premium A/c Dr. 1,00,000
General Reserve A/c Dr. 3,60,000
Profit and Loss A/c Dr. 2,15,000
To Bonus to shareholders A/c 6,75,000
(For making provision for bonus issue of one
share for every four shares held)
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Bonus to shareholders A/c Dr. 6,75,000
To Equity share capital A/c (For issue of bonus shares) 6,75,000
Extract of Balance Sheet as at 30th April, 2017 (after bonus issue)
Rs.
Authorised Capital
50,000 12% Preference shares of Rs.10 each 5,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
Issued and subscribed capital
24,000 12% Preference shares of Rs.10 each, fully paid 2,40,000
3,37,500 Equity shares of Rs.10 each, fully paid 33,75,000
(Out of above, 67,500 equity shares @ Rs.10 each were issued by way of bonus)
Reserves and surplus
Profit and Loss Account 3,85,000
Q-3 Following is the extract of the Balance Sheet of Manoj Ltd. as at 31st March, 20X1
Rs.
Authorized capital:
30,000 12% Preference shares of Rs.10 each 3,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
43,00,000
Issued and Subscribed capital:
24,000 12% Preference shares of Rs.10 each fully paid 2,40,000
2,70,000 Equity shares of Rs.10 each, Rs.8 paid up 21,60,000
Reserves and surplus:
General Reserve 3,60,000
Capital Redemption Reserve 1,20,000
Securities premium (collected in cash) 75,000
Profit and Loss Account 6,00,000
On 1st April, 20X1, the Company has made final call @ Rs. 2 each on 2,70,000 equity shares. The call money
was received by 20th April, 20X1. Thereafter, the company decided to capitalize its reserves by way of bonus
at the rate of one share for every four shares held.
You are required to prepare necessary journal entries in the books of the company and prepare the relevant
extract of the balance sheet as on 30th April, 20X1 after bonus issue.
Ans. Journal Entries in the books of Manoj Ltd.
Rs. Rs.
1-4-20x1 Equity share final call A/c Dr. 5,40,000
To Equity share capital A/c 5,40,000
(For final calls of Rs. 2 per share on 2,70,000
equity shares due as per Board's Resolution dated....)
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Page 4
Accounting for Bonus Issue and Right Issue
Q-1 Following is the extract of the Balance Sheet of Xeta Ltd. as at 31st March, 2017
Rs.
Authorised capital:
50,000 12% Preference shares of Rs.10 each 5,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
45,00,000
Issued and Subscribed capital:
24,000 12% Preference shares of Rs.10 each fully paid 2,40,000
2,70,000 Equity shares of Rs.10 each, Rs.8 paid up 21,60,000
Reserves and surplus:
General Reserve 3,60,000
Securities premium 1,00,000
Profit and Loss Account 6,00,000
On 1st April, 2017, the Company has made final call@ ` 2 each on 2,70,000 equity shares. The call money was
received by 20th April, 2017. Thereafter, the company decided to capitalize its reserves by way of bonus at
the rate of one share for every four shares held.
Show necessary journal entries in the books of the company and prepare the extract of the balance sheet as
on 30th April, 2017 after bonus issue.
Ans. Journal Entries in the books of Xeta Ltd. Rs. Rs.
1-4-2017 Equity share final call A/c Dr. 5,40,000
To Equity share capital A/c 5,40,000
(For final calls of Rs.2 per share on 2,70,000 equity shares
due as per Board's Resolution dated....)
20-4-2017 Bank A/c Dr. 5,40,000
Dr. To Equity share final call A/c 5,40,000
(For final call money on 2,70,000 equity shares received)
Securities Premium A/c Dr. 1,00,000
General Reserve A/c Dr. 3,60,000
Profit and Loss A/c Dr. 2,15,000
To Bonus to shareholders A/c 6,75,000
(For making provision for bonus issue of one
share for every four shares held)
Bonus to shareholders A/c Dr. 6,75,000
To Equity share capital A/c 6,75,000
(For issue of bonus shares)
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Extract of Balance Sheet as at 30th April, 2017 (after bous issue)
Rs.
Authorised Capital
50,000 12% Preference shares of Rs.10 each 5,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
Issued and subscribed capital
24,000 12% Preference shares of Rs.10 each, fully paid 2,40,000
3,37,500 Equity shares of Rs.10 each, fully paid 33,75,000
(Out of above, 67,500 equity shares @ ` 10 each were issued by wayof bonus)
Reserves and surplus
Profit and Loss Account 3,85,000
Q-2 Following is the extract of the Balance Sheet of Xeta Ltd. as at 31st March, 2017:
Rs.
Authorised capital:
50,000 12% Preference shares of Rs.10 each 5,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
45,00,000
Issued and Subscribed capital:
24,000 12% Preference shares of Rs.10 each fully paid 2,40,000
2,70,000 Equity shares of Rs.10 each, Rs.8 paid up 21,60,000
Reserves and surplus:
General Reserve 3,60,000
Securities premium 1,00,000
Profit and Loss Account 6,00,000
On 1st April, 2017, the Company has made final call @ Rs.2 each on 2,70,000 equity shares. The call money
was received by 20th April, 2017. Thereafter, the company decided to capitalize its reserves by way of bonus
at the rate of one share for every four shares held.
You are required to give necessary journal entries in the books of the company and prepare the extract of
the balance sheet as on 30th April, 2017 after bonus issue.
Ans. Journal Entries in the books of Xeta Ltd.
Rs. Rs.
1-4-2017 Equity share final call A/c Dr. 5,40,000
To Equity share capital A/c 5,40,000
(For final calls of Rs.2 per share on 2,70,000
equity shares due as per Board's Resolution dated....)
20-4-2017 Bank A/c Dr. 5,40,000
To Equity share final call A/c 5,40,000
(For final call money on 2,70,000 equity shares received)
Securities Premium A/c Dr. 1,00,000
General Reserve A/c Dr. 3,60,000
Profit and Loss A/c Dr. 2,15,000
To Bonus to shareholders A/c 6,75,000
(For making provision for bonus issue of one
share for every four shares held)
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Bonus to shareholders A/c Dr. 6,75,000
To Equity share capital A/c (For issue of bonus shares) 6,75,000
Extract of Balance Sheet as at 30th April, 2017 (after bonus issue)
Rs.
Authorised Capital
50,000 12% Preference shares of Rs.10 each 5,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
Issued and subscribed capital
24,000 12% Preference shares of Rs.10 each, fully paid 2,40,000
3,37,500 Equity shares of Rs.10 each, fully paid 33,75,000
(Out of above, 67,500 equity shares @ Rs.10 each were issued by way of bonus)
Reserves and surplus
Profit and Loss Account 3,85,000
Q-3 Following is the extract of the Balance Sheet of Manoj Ltd. as at 31st March, 20X1
Rs.
Authorized capital:
30,000 12% Preference shares of Rs.10 each 3,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
43,00,000
Issued and Subscribed capital:
24,000 12% Preference shares of Rs.10 each fully paid 2,40,000
2,70,000 Equity shares of Rs.10 each, Rs.8 paid up 21,60,000
Reserves and surplus:
General Reserve 3,60,000
Capital Redemption Reserve 1,20,000
Securities premium (collected in cash) 75,000
Profit and Loss Account 6,00,000
On 1st April, 20X1, the Company has made final call @ Rs. 2 each on 2,70,000 equity shares. The call money
was received by 20th April, 20X1. Thereafter, the company decided to capitalize its reserves by way of bonus
at the rate of one share for every four shares held.
You are required to prepare necessary journal entries in the books of the company and prepare the relevant
extract of the balance sheet as on 30th April, 20X1 after bonus issue.
Ans. Journal Entries in the books of Manoj Ltd.
Rs. Rs.
1-4-20x1 Equity share final call A/c Dr. 5,40,000
To Equity share capital A/c 5,40,000
(For final calls of Rs. 2 per share on 2,70,000
equity shares due as per Board's Resolution dated....)
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20-4-20x1 Bank A/c Dr. 5,40,000
To Equity share final call A/c 5,40,000
(For final call money on 2,70,000 equity shares received)
Securities Premium A/c Dr. 75,000
Capital redemption reserve A/c Dr. 1,20,000
General Reserve A/c Dr. 3,60,000
Profit and Loss A/c (b.f.) Dr. 1,20,000
To Bonus to shareholders A/c 6,75,000
(For making provision for bonus issue of one
share for every four shares held)
Bonus to shareholders A/c Dr. 6,75,000
To Equity share capital A/c 6,75,000
(For issue of bonus shares)
Extract of Balance Sheet as at 30th April, 20X1 (after bonus issue)
Rs.
Authorised Capital
30,000 12% Preference shares of Rs. 10 each 3,00,000
4,00,000 Equity shares of Rs. 10 each 40,00,000
Issued and subscribed capital
24,000 12% Preference shares of Rs.10 each, fully paid 2,40,000
3,37,500 Equity shares of Rs. 10 each, fully paid 33,75,000
(Out of the above, 67,500 equity shares @ Rs.10 each were issued by way of bonus shares)
Reserves and surplus Profit and Loss Account 4,80,000
Q-4 The following is the summarised Balance Sheet of Bumbum Limited as at 31st March, 2019:
`
Sources of funds
Authorized capital
50,000 Equity shares of ` 10 each 5,00,000
10,000 Preference shares of ‘ 100 each (8% redeemable) 10,00,000
15,00,000
Issued, subscribed and paid up
30,000 Equity shares of ` 10 each 3,00,000
5,000, 8%Redeemable Preference shares of ` 100 each 5,00,000
Reserves & Surplus x
Securities Premium 6,00,000
General Reserve 6,50,000
Profit & Loss A/c 40,000
Trade payables 4,20,000
25,10,000
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Page 5
Accounting for Bonus Issue and Right Issue
Q-1 Following is the extract of the Balance Sheet of Xeta Ltd. as at 31st March, 2017
Rs.
Authorised capital:
50,000 12% Preference shares of Rs.10 each 5,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
45,00,000
Issued and Subscribed capital:
24,000 12% Preference shares of Rs.10 each fully paid 2,40,000
2,70,000 Equity shares of Rs.10 each, Rs.8 paid up 21,60,000
Reserves and surplus:
General Reserve 3,60,000
Securities premium 1,00,000
Profit and Loss Account 6,00,000
On 1st April, 2017, the Company has made final call@ ` 2 each on 2,70,000 equity shares. The call money was
received by 20th April, 2017. Thereafter, the company decided to capitalize its reserves by way of bonus at
the rate of one share for every four shares held.
Show necessary journal entries in the books of the company and prepare the extract of the balance sheet as
on 30th April, 2017 after bonus issue.
Ans. Journal Entries in the books of Xeta Ltd. Rs. Rs.
1-4-2017 Equity share final call A/c Dr. 5,40,000
To Equity share capital A/c 5,40,000
(For final calls of Rs.2 per share on 2,70,000 equity shares
due as per Board's Resolution dated....)
20-4-2017 Bank A/c Dr. 5,40,000
Dr. To Equity share final call A/c 5,40,000
(For final call money on 2,70,000 equity shares received)
Securities Premium A/c Dr. 1,00,000
General Reserve A/c Dr. 3,60,000
Profit and Loss A/c Dr. 2,15,000
To Bonus to shareholders A/c 6,75,000
(For making provision for bonus issue of one
share for every four shares held)
Bonus to shareholders A/c Dr. 6,75,000
To Equity share capital A/c 6,75,000
(For issue of bonus shares)
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Extract of Balance Sheet as at 30th April, 2017 (after bous issue)
Rs.
Authorised Capital
50,000 12% Preference shares of Rs.10 each 5,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
Issued and subscribed capital
24,000 12% Preference shares of Rs.10 each, fully paid 2,40,000
3,37,500 Equity shares of Rs.10 each, fully paid 33,75,000
(Out of above, 67,500 equity shares @ ` 10 each were issued by wayof bonus)
Reserves and surplus
Profit and Loss Account 3,85,000
Q-2 Following is the extract of the Balance Sheet of Xeta Ltd. as at 31st March, 2017:
Rs.
Authorised capital:
50,000 12% Preference shares of Rs.10 each 5,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
45,00,000
Issued and Subscribed capital:
24,000 12% Preference shares of Rs.10 each fully paid 2,40,000
2,70,000 Equity shares of Rs.10 each, Rs.8 paid up 21,60,000
Reserves and surplus:
General Reserve 3,60,000
Securities premium 1,00,000
Profit and Loss Account 6,00,000
On 1st April, 2017, the Company has made final call @ Rs.2 each on 2,70,000 equity shares. The call money
was received by 20th April, 2017. Thereafter, the company decided to capitalize its reserves by way of bonus
at the rate of one share for every four shares held.
You are required to give necessary journal entries in the books of the company and prepare the extract of
the balance sheet as on 30th April, 2017 after bonus issue.
Ans. Journal Entries in the books of Xeta Ltd.
Rs. Rs.
1-4-2017 Equity share final call A/c Dr. 5,40,000
To Equity share capital A/c 5,40,000
(For final calls of Rs.2 per share on 2,70,000
equity shares due as per Board's Resolution dated....)
20-4-2017 Bank A/c Dr. 5,40,000
To Equity share final call A/c 5,40,000
(For final call money on 2,70,000 equity shares received)
Securities Premium A/c Dr. 1,00,000
General Reserve A/c Dr. 3,60,000
Profit and Loss A/c Dr. 2,15,000
To Bonus to shareholders A/c 6,75,000
(For making provision for bonus issue of one
share for every four shares held)
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Bonus to shareholders A/c Dr. 6,75,000
To Equity share capital A/c (For issue of bonus shares) 6,75,000
Extract of Balance Sheet as at 30th April, 2017 (after bonus issue)
Rs.
Authorised Capital
50,000 12% Preference shares of Rs.10 each 5,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
Issued and subscribed capital
24,000 12% Preference shares of Rs.10 each, fully paid 2,40,000
3,37,500 Equity shares of Rs.10 each, fully paid 33,75,000
(Out of above, 67,500 equity shares @ Rs.10 each were issued by way of bonus)
Reserves and surplus
Profit and Loss Account 3,85,000
Q-3 Following is the extract of the Balance Sheet of Manoj Ltd. as at 31st March, 20X1
Rs.
Authorized capital:
30,000 12% Preference shares of Rs.10 each 3,00,000
4,00,000 Equity shares of Rs.10 each 40,00,000
43,00,000
Issued and Subscribed capital:
24,000 12% Preference shares of Rs.10 each fully paid 2,40,000
2,70,000 Equity shares of Rs.10 each, Rs.8 paid up 21,60,000
Reserves and surplus:
General Reserve 3,60,000
Capital Redemption Reserve 1,20,000
Securities premium (collected in cash) 75,000
Profit and Loss Account 6,00,000
On 1st April, 20X1, the Company has made final call @ Rs. 2 each on 2,70,000 equity shares. The call money
was received by 20th April, 20X1. Thereafter, the company decided to capitalize its reserves by way of bonus
at the rate of one share for every four shares held.
You are required to prepare necessary journal entries in the books of the company and prepare the relevant
extract of the balance sheet as on 30th April, 20X1 after bonus issue.
Ans. Journal Entries in the books of Manoj Ltd.
Rs. Rs.
1-4-20x1 Equity share final call A/c Dr. 5,40,000
To Equity share capital A/c 5,40,000
(For final calls of Rs. 2 per share on 2,70,000
equity shares due as per Board's Resolution dated....)
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20-4-20x1 Bank A/c Dr. 5,40,000
To Equity share final call A/c 5,40,000
(For final call money on 2,70,000 equity shares received)
Securities Premium A/c Dr. 75,000
Capital redemption reserve A/c Dr. 1,20,000
General Reserve A/c Dr. 3,60,000
Profit and Loss A/c (b.f.) Dr. 1,20,000
To Bonus to shareholders A/c 6,75,000
(For making provision for bonus issue of one
share for every four shares held)
Bonus to shareholders A/c Dr. 6,75,000
To Equity share capital A/c 6,75,000
(For issue of bonus shares)
Extract of Balance Sheet as at 30th April, 20X1 (after bonus issue)
Rs.
Authorised Capital
30,000 12% Preference shares of Rs. 10 each 3,00,000
4,00,000 Equity shares of Rs. 10 each 40,00,000
Issued and subscribed capital
24,000 12% Preference shares of Rs.10 each, fully paid 2,40,000
3,37,500 Equity shares of Rs. 10 each, fully paid 33,75,000
(Out of the above, 67,500 equity shares @ Rs.10 each were issued by way of bonus shares)
Reserves and surplus Profit and Loss Account 4,80,000
Q-4 The following is the summarised Balance Sheet of Bumbum Limited as at 31st March, 2019:
`
Sources of funds
Authorized capital
50,000 Equity shares of ` 10 each 5,00,000
10,000 Preference shares of ‘ 100 each (8% redeemable) 10,00,000
15,00,000
Issued, subscribed and paid up
30,000 Equity shares of ` 10 each 3,00,000
5,000, 8%Redeemable Preference shares of ` 100 each 5,00,000
Reserves & Surplus x
Securities Premium 6,00,000
General Reserve 6,50,000
Profit & Loss A/c 40,000
Trade payables 4,20,000
25,10,000
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Application of funds
PPE (net) 7,80,000
Investments (market value ` 5,80,000) 4,90,000
Deferred Tax Assets 3,40,000
Trade receivables 6,20,000
Cash & Bank balance 2,80,000
25,10,000
In Annual General Meeting held on 20th June, 2019 the company passed the following resolutions:
(i) To split equity share of ` 10 each into 5 equity shares of ` 2 each from 1st July, 2019.
(ii) To redeem 8% preference shares at a premium of 5%.
(iii) To issue fully paid bonus shares in the ratio of one equity share for every 3 shares held on record
date.
On 10th July, 2019 investments were sold for ` 5,55,000 and preference shares were redeemed.
The bonus issue was concluded by 12th September, 2019
You are required to journalize the above transactions including cash transactions and prepare Balance
Sheet as at 30th September, 2019. All working notes should form part of your answer.
Ans. Bumbum Limited
Journal Entries
2019 Dr. (`) Cr. (`)
July 1 Equity Share Capital A/c (` 10 each) Dr. 3,00,000
To Equity share capital A/c (` 2 each) 3,00,000
(Being equity share of ` 10 each splitted into 5 equity
shares of ` 2 each) {1,50,000 x 2}
July 10 Cash & Bank balance A/c Dr. 5,55,000
To Investment A/c 4,90,000
To Profit & Loss A/c 65,000
(Being investment sold out and profit on sale credited
to Profit & Loss A/c)
July 10 8% Redeemable preference share capital A/c Dr. 5,00,000
Premium on redemption of preference share A/c Dr. 25,000
To Preference shareholders A/c 5,25,000
(Being amount payable to preference share holders
on redemption)
July 10 Preference shareholders A/c Dr. 5,25,000
To Cash & bank A/c 5,25,000
(Being amount paid to preference shareholders)
July 10 General reserve A/c Dr. 5,00,000
To Capital redemption reserve A/c 5,00,000
(Being amount equal to nominal value of preference
shares transferred to Capital Redemption Reserve A/c
on its redemption as per the law)
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FAQs on Important Questions & Answers: Accounting for Bonus Issue & Right Issue - Principles and Practice of Accounting - CA Foundation
| 1. What is a bonus issue in accounting? |  |
Ans. A bonus issue, also known as a scrip issue or capitalization issue, is a method used by companies to issue additional shares to their existing shareholders without receiving any additional payment. This is typically done by capitalizing the company's profits or reserves and converting them into additional shares. The purpose of a bonus issue is to increase the liquidity of the company's shares and make them more affordable for small investors.
| 2. How does a bonus issue affect the financial statements of a company? | |
Ans. A bonus issue does not have any direct impact on the financial statements of a company. The number of shares issued increases, but the company's total equity remains the same because no cash is received in exchange for the additional shares. However, the bonus issue may impact the per-share earnings, as the earnings will be distributed among a larger number of shares after the bonus issue.
| 3. What is a right issue in accounting? | |
Ans. A right issue is a way for companies to raise additional capital by offering their existing shareholders the right to purchase new shares at a discounted price. This allows shareholders to buy additional shares in proportion to their existing holdings. The purpose of a right issue is to provide existing shareholders with the opportunity to maintain their proportional ownership in the company and raise funds for the company's expansion or debt repayment.
| 4. How does a right issue affect the financial statements of a company? | |
Ans. A right issue affects the financial statements of a company in multiple ways. Firstly, the company's equity increases as new capital is raised through the issue of additional shares. Secondly, the company's cash balance increases as shareholders exercise their right to purchase the new shares. Additionally, the number of shares outstanding increases, which may impact the per-share earnings and other financial ratios.
| 5. What are the accounting entries for a bonus issue and a right issue? | |
Ans. For a bonus issue, the accounting entries involve transferring the appropriate amount from the company's profits or reserves to the share capital or share premium account. This increases the number of shares outstanding without affecting the company's total equity.
For a right issue, the accounting entries include recording the cash received from shareholders in the cash account and increasing the share capital and share premium accounts by the amount of capital raised. The number of shares outstanding also increases based on the shares subscribed by shareholders.
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