IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI...
Transcript of IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI...
![Page 1: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/1.jpg)
1/24/2013
1
IPCC Group-I Paper 1: Accounting, Chapter 4
CA SK Chhabra
![Page 2: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/2.jpg)
1/24/2013
2
What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical Questions
![Page 3: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/3.jpg)
1/24/2013
3
Bonus Shares are shares issued by a company free of cost to its existing shareholders on a pro rata basis.
![Page 4: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/4.jpg)
1/24/2013
4
SEBI Guidelines 2000 for Bonus
![Page 5: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/5.jpg)
1/24/2013
5
Bonus Issues can be made only out of ◦ Free Reserve built out of the profits or ◦ Capital redemption reserve or ◦ Securities Premium collected in Cash only
For pending Conversion of Fully Convertible(FCD)/ Partly Convertible Debentures (PCD) and bonus share are issued◦ Similar benefit is extended to the holder of such
FCD/PCD on their conversion
![Page 6: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/6.jpg)
1/24/2013
6
Reserves from Revaluation of Fixed Assets ◦ Can not be used for Issue of Bonus Shares
Bonus Issue ONLY for Fully Paid-Up Shares Partly Paid-up Shares can be made Fully Paid-up◦ Receipt of Cash◦ Bonus Unpaid Call – By Paying through Reserves
![Page 7: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/7.jpg)
1/24/2013
7
If nothing specified always assume ◦ Securities Premium is received in cash and ◦ Capital Reserve is NOT received in Cash
![Page 8: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/8.jpg)
1/24/2013
8
![Page 9: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/9.jpg)
1/24/2013
9
Issue fully paid Bonus Shares ◦ Not to make Final Call as Bonus Call incase Final Call is
Unpaid
Write off ◦ Preliminary Expenses◦ Underwriting Commission etc
![Page 10: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/10.jpg)
1/24/2013
10
Write off Discount on issue of Shares and Debentures
Write off Premium on Redemption of Shares and Debentures
Allow Buy Back of Shares ◦ Section77B
![Page 11: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/11.jpg)
1/24/2013
11
Important Entries
![Page 12: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/12.jpg)
1/24/2013
12
On giving Bonus by converting partly paid Shares into fully paid Share
On declaration of such BonusCapital Reserve A/c Dr.
(realized in cash only)General Reserve A/c Dr.Profit & Loss A/c Dr.
To Bonus to Shareholders A/c
![Page 13: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/13.jpg)
1/24/2013
13
On giving Bonus by converting partly paid shares into fully paid share
On Making the Final Call due
Share Final Call A/c Dr.To Share Capital A/c
On Adjustment of Final CallBonus to Shareholders A/c Dr.
To Share Final Call A/c
![Page 14: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/14.jpg)
1/24/2013
14
Capital Reserve and Securities Premium received in Cash Only can be utilized for issue of Fully Paid Bonus Shares
Free Reserves include Reserves like◦ Profit & Loss Account – Credit Balance◦ Revenue Reserves◦ General Reserve◦ Dividend Equalization Reserve◦ Any other Reserve which can be used for payment of
Dividend
![Page 15: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/15.jpg)
1/24/2013
15
Converting Partly Paid-up Shares into Fully Paid-Up by issue of Bonus
![Page 16: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/16.jpg)
1/24/2013
16
Following items in the Trial Balance of Gopal Ltd. As at 31st March 2012:
40,000 Equity Shares of Rs. 10 each, Rs. 7.50 paid up Rs.3,00,000 Capital Redemption Reserve Rs.30,000 Plant Revaluation Reserve Rs.10,000 Securities Premium Account Rs.35,000 General Reserve Rs.1,00,000 Profit & Loss Account Rs.50,000 Capital Reserve ( including Rs. 35,000 being Profit on
Sale of Machinery) Rs.75,000
The company decided to convert the partly paid equity shares into fully paid shares by way of bonus.
Required: Pass the necessary journal entries
![Page 17: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/17.jpg)
1/24/2013
17
Capital Redemption Reserve, Plant Revaluation Reserve and Securities Premium cannot be capitalized for converting partly paid shares into fully paid shares
Capital Reserve realized in cash can be utilized for bonus issue
Capital Redemption Reserve and Securities Premium can be used to issue only fully-paid bonus shares
![Page 18: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/18.jpg)
1/24/2013
18
Date Particulars L.F Dr. (Rs.) Cr. (Rs.)
(i) Equity Share Final Call A/c Dr.To Equity Share Capital A/c
(Being the final call of Rs. 2.50 each on 40,000 equity shares to make them fully paid up)
1,00,0001,00,000
![Page 19: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/19.jpg)
1/24/2013
19
Date Particulars L.F Dr. (Rs.) Cr. (Rs.)
(ii) Capital Reserve A/c Dr.General Reserve A/c Dr.
To Bonus to Shareholders A/c(Being the transfer of Rs. 25,000 from Capital Reserve & Rs. 75,000 from General Reserve to make the partly paid up shares fully paid up)
35,00065,000
1,00,000
![Page 20: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/20.jpg)
1/24/2013
20
Date Particulars L.F Dr. (Rs.) Cr. (Rs.)
(iii) Bonus to Shareholders A/c Dr.To Equity Share Final Call A/c
(Being the amount due on final call adjusted against transfer from General Reserve to Bonus to Shareholders A/c)
1,00,0001,00,000
![Page 21: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/21.jpg)
1/24/2013
21
Issue of Fully Paid Bonus Shares
![Page 22: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/22.jpg)
1/24/2013
22
Following items appear in the Trial Balance of Govind Ltd. As at 31st March, 2012.
40,000 Equity Shares of Rs.10 each Rs.4,00,000 Capital Redemption Reserve Rs.30,000 Plant Revaluation Reserve Rs.10,000 Securities Premium Account Rs.35,000 General Reserve Rs.1,00,000 Profit & Loss Account Rs.50,000 Capital Reserve (including Rs.25,000 being
Profit on Sale of Machinery) Rs.75,000
The company decided to issue bonus shares to its shareholders at the rate of one share for every four shares held
Required: Pass the necessary journal entries. It is desired that there should be minimum reduction in free reserves
![Page 23: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/23.jpg)
1/24/2013
23
Plant Revaluation Reserve cannot be utilized to issue bonus shares
Capital Reserve realized in cash can be utilized for bonus issue
![Page 24: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/24.jpg)
1/24/2013
24
Date Particulars L.F Dr. (Rs.) Cr. (Rs.)(i) Capital Reserve A/c Dr.
Capital Redemption Reserve A/c Dr.Securities Premium A/c Dr.General Reserve A/c Dr.
To Bonus to Shareholders A/c(Being the bonus declared by issuing 1 bonus share for every 4 shares held as per general body’s resolution dated)
25,00030,00035,00010,000
1,00,000
![Page 25: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/25.jpg)
1/24/2013
25
Date Particulars L.F Dr. (Rs.) Cr. (Rs.)(ii) Bonus to Shareholders A/c Dr.
To Equity Share Capital A/c(Being the issue of 10,000 shares of Rs. 10 each by way of bonus)
1,00,0001,00,000
![Page 26: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/26.jpg)
1/24/2013
26
Comprehensive Bonus Problem
![Page 27: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/27.jpg)
1/24/2013
27
Following is the extract of the Balance sheet of Mohan Ltd. as at 31st March, 2012
Particulars Rs.Issued and Subscribed capital:90,000 Equity shares of Rs.10 each, Rs.8 paid up 7,20,000Reserves and surplus:General Reserve 1,20,000Capital Reserve 75,000Securities premium 25,000Profit and Loss Account 2,00,000Secured Loan:12% Partly Convertible Debentures @ Rs.100 each 5,00,000
![Page 28: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/28.jpg)
1/24/2013
28
On 1st April, 2012, the Company has made final call @ Rs.2 each on 90,000 equity shares. The call money was received by 20th April, 2012. Thereafter, the company decided to capitalize its reserves by way of bonus at the rate of one share for every four shares held. Securities premium of Rs.25,000 includes a premium of Rs.5,000 for shares issued to vendors pursuant to a scheme of amalgamation. Capital reserves include Rs.40,000, being profit on sale of plant and machinery, 20% of 12% debentures are convertible into equity shares of Rs.10 each fully paid on 1st July, 2012.
Pass the journal entries
![Page 29: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/29.jpg)
1/24/2013
29
DATE PARTICULARS DEBIT[RS] CREDIT[RS]
1 April Equity Share Final Call A/C Dr To Equity Share Capital A/C
180000180000
![Page 30: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/30.jpg)
1/24/2013
30
20 April Bank A/C Dr To Equity Share Final Call
180000180000
DATE PARTICULARS DEBIT[RS] CREDIT[RS]
![Page 31: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/31.jpg)
1/24/2013
31
Capital Reserve A/C Dr Securities Premium A/C Dr General Reserve A/C Dr Profit And Loss A/C Dr
To Bonus To Shareholders
400002000012000045000
225000
DATE PARTICULARS DEBIT[RS] CREDIT[RS]
![Page 32: IPCC Group-I Paper 1: Accounting, Chapter 4 CA SK Chhabra · 1/24/2013 2 What is Bonus Issue? SEBI Guidelines on Bonus Issues Uses of Securities Premium Accounting Entries Practical](https://reader031.fdocuments.us/reader031/viewer/2022011802/5b4c08e87f8b9a5c278d20c9/html5/thumbnails/32.jpg)
1/24/2013
32
20 April Bonus To Shareholders A/C Dr To Equity Share Capital A/C
225000225000
DATE PARTICULARS DEBIT[RS] CREDIT[RS]