Question
As of March 31, 2026, Z Ltd. has a Paid-up Share Capital
of ₹10 Lakh (1 Lakh shares of ₹10 each) and Free Reserves of ₹8 Lakh. The company decides to issue Bonus Shares in the ratio of 1:2. What will be the balance in the Free Reserves account immediately after the bonus issue?Solution
Bonus Shares to be issued: 1 for every 2 shared held = 1,00,000 𝑠ℎ𝑎𝑟𝑒𝑠 × (1/2) = 50,000 𝑠ℎ𝑎𝑟𝑒𝑠 Value of Bonus Issue: 50,000 𝑠ℎ𝑎𝑟𝑒𝑠 × 10 ( 𝐹𝑎𝑐𝑒 𝑉𝑎𝑙𝑢𝑒 ) = 5,00,000 Remaining Reserves: Free reserve – value of bonus shares issued = 8,00,000−5,00,000 = Rs. 𝟑 , 𝟎𝟎 , 𝟎𝟎𝟎 Note - Accounting Entry for this will be Debit Free Reserves and Credit Share Capital. by 3 Lakh
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