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Bonus issue and stock split up

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(Querist)
05 March 2009 What are differences between bonus issue and stock split up? Is the bonus shares represent a compensation for inflation factor for the money initially invested? If so, is it advisable for the organisation to issue bonus shares?
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CA Tirth Ajani

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CA Tirth Ajani (Expert)
05 March 2009 bonus shares are issued to the existing shareholders by converting free reserves or share premium account to equity capital without taking any consideration from investors.

A type of corporate action where a company's existing shares are divided into multiple shares. Although the amount of shares outstanding increases by a specific multiple, the total value of the shares remains the same i.e. share capital compared to pre-split amounts, because no real value has been added as a result of the split.

there are many reasons behind issue of bonus shares and stock split up and inflation factor can be one of them.
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