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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

    Explanation :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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