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Fifteenth Edition : September 2025
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CHAPTER
ACCOUNTING FOR BONUS ISSUE & RIGHT ISSUE
CHAPTER
DESCRIPTIVE QUESTIONS
Q.1 What do you mean by issue of Bonus shares? Ans.
SHORT NOTES
Q.1 Right Issue.
Ans. a
Q.2 Advantages of Right Issue.
Ans. Advantages of Right Issue are as follows:
Q.3 Disadvantages of Right Issue.
Ans. Disadvantages of Right Issue are as follows:
TRUE OR FALSE
Q.1 Revaluation reserve may be utilised for issuing fully paid bonus shares.
Ans. False:
Q.2 Bonus issue means an issue of additional shares to existing shareholders by paying cash.
Ans. False: -
Q.3 Issuing of right shares results in increase in Earning per share.
Ans. False:
PRACTICAL QUESTIONS
Q.1 Following items appear in the Trial Balance of Saral Ltd. (a listed Company) as on 31st March, 2015:
The company decided to issue to equity shareholders bonus shares at the rate of 1 share for every 2 shares held. Company decided that there should be the minimum reduction in free reserves.
21.4
Pass necessary Journal Entries in the books of Saral Ltd. [CA Inter May 2014, 4 Marks] [CA Inter RTP]
Solution:
Journal Entries
Particulars ` `
Q.2 Following items appear in the Trial Balance of Hello Ltd. as on 31st March, 2017:
The company decided to issue to equity shareholders bonus shares at the rate of 1 share for every 3 shares held. Company decided that there should be the minimum reduction in free reserves.
Pass necessary Journal Entries in the books Hello Ltd. [CA Inter RTP]/[CA Inter MTP]
Solution:
Journal Entries
Q.3 Following items appear in the Trial Balance of Beta Ltd. as on 31st March, 2017:
Equity Shares of ` 100 each
The company decided to issue to equity shareholders bonus shares at the rate of 1 share for every 3 shares held. Company decided that there should be the minimum reduction in free reserves. Pass necessary Journal Entries in the books of Beta Ltd. [CA Inter MTP]
Solution:
Journal Entries
Q.4 Following are the balances appear in the trial balance of Arya Ltd. as at 31st March, 2018.
Issued and Subscribed Capital: ` 10,000; 10% Preference Shares of ` 10 each fully paid 1,00,000 1,00,000 Equity Shares of ` 10 each ` 8 paid up 8,00,000
21.6
On 1st April, 2018 the company has made final call @ ` 2 each on 1,00,000 Equity Shares. The call money was received by 15th April, 2018. Thereafter the company decided to issue bonus shares to equity shareholders at the rate of 1 share for every 5 shares held and for this purpose, it decided that there should be minimum reduction in free reserves. Pass Journal entries. [CA Inter May 2018, 4 Marks]
Solution:
Journal Entries
Note:
Q.5 Following items appear in the Trail Balance of Star Ltd. as on 31st March, 2019:
Particulars ` 80,000 Equity shares of ` 10 each, ` 8 paid-up
Reserve (including ` 45,000 being profit on sale of Machinery) 1,10,000
21.7
On 1st April, 2019, the Company has made final call on Equity shares @ ` 2 per share. The entire money was received in the month of April, 2019.
On 1st June, 2019, the Company decided to issue to Equity shareholders bonus shares at the rate of 2 shares for every 5 shares held and for this purpose, it was decided that there should be minimum reduction in free reserves. Pass necessary journal entries in the Books of Star Ltd. [CA Inter January 2021, 5 Marks]
Solution: Journal Entries in the books of Star Ltd.
Q.6 Following items appear in the Trial Balance of x Ltd. as at 31st March, 2013:
Authorised share capital: 3,00,000 equity shares of ` 10 each 30,00,000
Particulars `
Issued and Subscribed share capital:
Equity Shares of ` 10 each, ` 7.50 paid up
Equity Shares of ` 10 each
Capital Reserve (including ` 50,000 being profit on sale of machinery) 1,50,000
Remaining balance of capital reserve is on account of non-cash items.
The company decided to convert the partly paid equity shares into fully paid shares by way of bonus and to issue fully paid-up bonus shares to the holders of fully paid up shares in the same ratio. You are required to pass the necessary journal entries assuming that there should be minimum reduction in free reserves. [CA Inter RTP]
Solution:
Journal Entries
