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    Question

    Which of the following statements is true with regard to

    declaring and issuing of Bonus Shares?
    A Assets are transferred from the company to the shareholders. Correct Answer Incorrect Answer
    B A Bonus issue results in decrease in reserves and surplus. Correct Answer Incorrect Answer
    C A Bonus issue is same as declaration of dividends. Correct Answer Incorrect Answer
    D A Bonus issue affects cash and bank balances. Correct Answer Incorrect Answer

    Solution

    A Bonus issue involves issuing fully paid-up shares to existing shareholders out of free reserves or securities premium. It reduces reserves but doesn’t affect the total capital employed or cash position. It’s not the same as dividends, as it involves capitalizing profits, not distributing them.

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