BONUS ISSUE ......... JOURNAL

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MPR Sanjay Kumar

3145 Points Posted on 02 August 2022

capital redemption reserve a/c Dr
securities premium accounta/c Dr
General reserve a/c Dr

To bonus to shareholders a/c

Bonus to shareholders a/c Dr
To equity share capital a/c

General reserve a/c Dr
P& L a/c Dr
To bonus to shareholders a/c

share final call a/c Dr
To share capital a/c

Bonus to shareholders a/c Dr
To share final call a/c

Query :1.what is mean by capital redemption reserve account and securities premium account??

Query:2. could you please explain in detail this all journal entries with explanation please

Replies (2)

prasad Nilugal

GST Practitioner & Accounts

15085 Points Posted on 02 August 2022

1. Capital redemption reserve is reserve that created out Profit & Loos Appropriation account , for various purpose like issue of bonus shares , redemption of preference shares etc. Capital redemption reserve A/c , is under Reserve surplus , liability side , Balance sheet .

At the time of issue of shares by the company , shares are issued at premium , same premium amount that we received is transferred to " security premium account" is called Security premium account . security premium account is under reserve surplus , liability side balance sheet ,

2 . As per Companies Act , when company decided to issue Bonus shares , shares Can be issued out of Capital redemption reserve , security premium account and General reserve and capitalize the profit .

Above mentioned entries are of

i) Bonus shares are issued out of reserve and same shares are credited to share holders account

ii) bonus shares are transferred to equity shares Capital account , and capitalize the profit .