Jayapalan Nair.L (Chief Accountant) (24 Points)
15 February 2014Sir,
How we will record (accounting entry) while receiving bonus shares? We are getting it without any cost. So why we cannot treat it as a GAIN/Income? Why not possible to pass this entry;
Debit: Investment (face value of bonus shares received)
Credit: Income /gain from Investment
Please give your valuable explanation regarding this accounting treatment.
CA Ketan Kothari
(Associate Consultant)
(86 Points)
Replied 16 February 2014
| Originally posted by : Jayapalan Nair.L | ||
 |
Sir, How we will record (accounting entry) while receiving bonus shares? We are getting it without any cost. So why we cannot treat it as a GAIN/Income? Why not possible to pass this entry; Debit: Investment (face value of bonus shares received) Credit: Income /gain from Investment Please give your valuable explanation regarding this accounting treatment. |
 |
Hi Jayapalan,
Receiver of the Bonus share does not post any entry at the time of receiving such shares. There is only increase in number of shares hold by you and not in your Investment.
Coming to second point: the entry passed by you is wrong for following reasons :
Investment amount cannot be increased by debiting the investment account as you have not made any investment at the time of receiving of shares. You have received the shares for free of cost and the nominal value of the shares received has not been invested by you.
Income from Bonus share is realised only when you sale an investment. At the time of receiving of bonus shares there is no profit to you in real terms. Profit may be on virtual terms. Anticipated profits cannot be recognised in books of account.
Please get back if you have any further queries.
Gaurav Khemka
(2 Points)
Replied 18 August 2017
Chamodi Perera
(2 Points)
Replied 16 April 2024
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