i think bonus share are issued it will not effect the position of working capital

Harry

1. So u r asking if P&L dr, Share premium cr entry can be made. The answer is NO. Share premium represents the extent to which the company is expected to perform well. For example, if face value is Rs 10 and Issue price is 25, Rs 15 is share premium. This Rs15 indicates that to the extent of Rs 15, the company not only generates return on Rs 10(face value) but also further return Rs 15. So there is no point in creating share premium from p&l

2. The logic for bonus issue is simply this : no of shares for share holders will increase without any cost for share holder. For this company is compromising its profits. Generally if the comapny makes profits, share holders get profit shares in Money (dividend) . But here share holders get the share of profits in form of further shares.

Having come to this course, I faced such similar basic doubts where nobody clarified me very clearly. Unfortunately such things are not explained to us anywhere. If u have lot of such basic doubts, there is only one way - just accept the fact without questioning logic. After some time, u will get the logic.

i think no

one of the major problem i have seen in todays generation that they use so much of shortcuts which make a normal line to be non understandable. so please send your query to me again. one more thing.about bonus issue is: 1.it makes share cheaper so that the people who were not able to afford to invest in the shares of that company are able to invest now. 2. one the AMBAMI's said that BONUS ISSUE SHOWS THAT THE COMPANY'S EARNING HAVE DOUBLED ONLY THEN THE BONUS ISSUE WORKS. you know how? let me explain suppose a company have share capital of Rs.1000 @ share of rs 10each. company declares a divident of 10% i.e. rs 100 next year company declares bonus issue of 2:1 nw the capital will be Rs. 3000 now in ordr to MAINTAIN a dividend of 10% the company has to make thrice effort as compared to earlier. which express that the companys earnings have INCREASED TREMENDIOUSLY. k boss i hope this will work for you. need more clarification? i was not able to understand your probelem regarding security premium. so clarify it. Regards Akhil Yadav

IF ON THE VERY DAY OF ISSUING BONUS SHARES THE COMPANY DECLARES DIVIDEND ALSO. IN THAT CASE WILL BONUS SHARES ELIGIBLE TO RECEIVE DIVIDEND? IF BONUS SHARES ARE ISSUED IN THE MIDDLE OF THE YEAR WHETHER THEY GET FULL DIVIDEND OR ON PRO RATA BASIS?

Bonus issue is being made generally in the AGM. hence your question is meaning less. moreover, if bonus issue is made in the last or present year and dividend is paid thereafter then holder of both kind of shares (practically differenciation is not possible) are eligible for equilent dividend. ok

Issue of Bonus Shares is one of the way of distribution of reserve profit to the company shareholders

akhil, hope  u didnt get my question clearly... i will put it differently. A co . ltd  having share capital of  Rs. 10 lakh (rs 10 FV) makes bonus issue @ 1:2 in the AGM ie, 30th september 2008.The company close it accounts on 31 st march 2009 and makes entry for proposed dividend @ 10%. My question is wht  will be the figure of proposed dividend? RS. 150000 OR 125000? will the bonus shares eligible for full year dividend ? what if  it was not a bonus issue but a new public issue made by the company?    pls answer me if u got  time to spare. if u r busy with ur preparations carry on, i dont mind... but this is something related with our consolidation chapter....

@ Maria i think you are treating dividend like interest, dividend is share of profit on a share(calculated on face value) irrespective of its issue time. So if a company issue new shares by public issue in feb and declare dividend in march every share will get same dividend. I hope its clear to you

but just now i read in our law book that on new shares , dividend shall be paid for the period starting from the date of allotment and ending on the last day of the concerned financial year. ie, pro rata basis. wont that applicable for bonus shares also????? pls clarify....

first of all shares are of 2 types equity and preference. preference shareholderes are eligilble to receive dividend proportionately since their propertion is defined.

moreover, you cannt identify the share of bonus once such issue is made,  if you can do then tell me reliance had recently made a bonus issue, what you need to do is that just sit with a broker and ask him may i buy a share which were recently issued by company as bonus.? he may abuse you and will throw out of his office.

ek khawat hai hindi main, " AADHI ADHURI KNOWLEDGE gyaan , 0% KNOWLEDGE SE BHI BEKAAR HOTI HAI.

law book is also right and you too but go through the same book once again but in depth.

Ok  Maria

Regards

Akhil Yadav

try to visualize the things. due to typing constrain i cannt explain you whole of the things in a mail.

ok  Maria

Regards

Akhil Yadav

laws book is attached on the very first page of this discussion for reference. :-D

:-)

ok. akhil. thanx for the clarification. the problem is that i lack the practical exposure. best of luck to u....