How is Issue of Bonus Shares Accounted?

Issue of Bonus Shares
Some times the company may not be in a position to pay cash dividend inspite of adequate profit due to adverse effect on Working Capital position. Prudent companies, later on issue bonus shares to the existing equity shareholders. Such shares are issued as per the guidelines issued by SEBI. Issue of Bonus shares refers to conversion of reserves into share capital.
Following two entries are passed :
  1. Profit & Loss A/cDr.
    • General Reserve A/cDr.
    • Securities Premium A/cDr.
    • Capital Redemption Reserve A/cDr.
    • To Bonus to Equity Shareholders A/c
  2. Bonus to Equity Shareholders A/cDr.
    • To Equity Share Capital A/c
    • To Securities Premium A/c (if any)
The fact regarding issue of bonus shares should be disclosed in the Balance Sheet in schedule on share capital. Numbers of bonus shares and the sum of bonus issue should be disclosed.