Explain the following term/concept:Capitalisation of Reserves - Secretarial Practice

Short Note

Explain the following term/concept:
Capitalisation of Reserves

Solution

(1) The process of issuing the bonus shares out of the company's profits or reserves is known as "Capitalisation of Profits or Reserves.
(2) It is a reward to shareholders, distributed in proportion to the number of shares each owns. The process has no impact on a corporation book value.

Concept: Precautions to Be Taken by the Secretary While Corresponding with Members
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Balbharati Secretarial Practice 12th Standard HSC Maharashtra State Board
Chapter 6 Correspondence with Members
Exercises | Q 2. 1. | Page 103