CA Foundation Exam > CA Foundation Notes > Principles and Practice of Accounting > PPT: Accounting for Bonus Issue and Right Share
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Page 1 Rights issue and bonus issue Page 2 Rights issue and bonus issue Legends used in the presentation Act Companies Act, 2013 AOA Articles of Association BOD Board of Directors FMV Fair Market Value IFSC International Financial Services Centre ITA Income Tax Act Page 3 Rights issue and bonus issue Legends used in the presentation Act Companies Act, 2013 AOA Articles of Association BOD Board of Directors FMV Fair Market Value IFSC International Financial Services Centre ITA Income Tax Act Presentation Schema Types of issue Rights issue Provisions under the Act Exceptions Secretarial Compliance Caveats Bonus issue Reserves to be utilised and conditions to be fulfilled Secretarial Compliance Caveats Income Tax implications Judicial precedents Page 4 Rights issue and bonus issue Legends used in the presentation Act Companies Act, 2013 AOA Articles of Association BOD Board of Directors FMV Fair Market Value IFSC International Financial Services Centre ITA Income Tax Act Presentation Schema Types of issue Rights issue Provisions under the Act Exceptions Secretarial Compliance Caveats Bonus issue Reserves to be utilised and conditions to be fulfilled Secretarial Compliance Caveats Income Tax implications Judicial precedents Types of issue Fund raising Equity Public issue Debt Rights issue Private placement Bonus issue ESOP Sweat equity Page 5 Rights issue and bonus issue Legends used in the presentation Act Companies Act, 2013 AOA Articles of Association BOD Board of Directors FMV Fair Market Value IFSC International Financial Services Centre ITA Income Tax Act Presentation Schema Types of issue Rights issue Provisions under the Act Exceptions Secretarial Compliance Caveats Bonus issue Reserves to be utilised and conditions to be fulfilled Secretarial Compliance Caveats Income Tax implications Judicial precedents Types of issue Fund raising Equity Public issue Debt Rights issue Private placement Bonus issue ESOP Sweat equity Rights issue It is the process of raising funds by issuing shares to the existing shareholders of the Company It means that the existing shareholders have the pre-emptive right to subscribe the shares of the Company in relation to an outsider Rights issue can be opted by a Company only in case of further issue of shares and not at the time of first issue The shareholder has the right to either accept or renounce the offer made by the CompanyRead More
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FAQs on PPT: Accounting for Bonus Issue and Right Share - Principles and Practice of Accounting - CA Foundation
| 1. What is a bonus issue in accounting? |  |
Ans. A bonus issue in accounting refers to the distribution of additional shares to existing shareholders of a company at no cost. This is done by capitalizing the company's reserves or profits and converting them into new shares. The purpose of a bonus issue is to reward existing shareholders and increase the liquidity of the company's shares in the market.
| 2. How is a bonus issue accounted for in the financial statements? | |
Ans. A bonus issue is accounted for by adjusting the share capital and reserves of the company. The share capital is increased by the number of bonus shares issued, while the reserves are reduced by the same amount. This results in a transfer of value from the reserves to the share capital. The accounting entry for a bonus issue typically involves debiting the share capital and crediting the reserves.
| 3. What is a right share in accounting? | |
Ans. A right share in accounting refers to the offering of additional shares to existing shareholders of a company at a discounted price. Unlike a bonus issue, shareholders are required to pay for the right shares. The purpose of a right share is to raise additional capital for the company and provide an opportunity for existing shareholders to increase their ownership.
| 4. How are right shares accounted for in the financial statements? | |
Ans. Right shares are accounted for by adjusting the share capital and reserves of the company. The share capital is increased by the amount of capital contributed by shareholders through the purchase of right shares, while the reserves remain unchanged. The accounting entry for a right share typically involves debiting the share capital and crediting the shareholders' equity.
| 5. What are the differences between a bonus issue and a right share? | |
Ans. The main differences between a bonus issue and a right share are:
- Bonus Issue: Bonus shares are issued to existing shareholders at no cost. The purpose is to reward shareholders and increase market liquidity. Shareholders do not need to pay for the bonus shares.
- Right Share: Right shares are offered to existing shareholders at a discounted price. The purpose is to raise additional capital and provide an opportunity for shareholders to increase their ownership. Shareholders need to pay for the right shares.
In terms of accounting, bonus issues involve a transfer of value from reserves to share capital, while right shares involve a transfer of value from shareholders to share capital.
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Nov 23, 2024 Last updated |
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