Question

Explain the following term/concept.

Bonus shares

Answer 1

(a) Bonus issues refers to the fully paid up shares given to its existing equity shareholders without any cost, based upon the number of shares they own.
(b) Usually, financially sound companies issue bonus shares out of its accumulated distributable profits or reserves. Hence, as the profits or reserves are capitalised, it is also called as ‘Capitalisation of Profits or Reserves’.