Dear Chartered persons,
Accounting for bonus issue Journal entries...
1.sanction of an issue bonus shares
capital redemption reserve ac DR.
securities premium ac DR.
General reserve ac DR.
profit and loss ac DR.
Bonus to shareholders ac CR.
2.issue of bonus shares
Bonus to shareholders ac DR.
share capital ac CR
3.partly paid to fully paid..
General reserve ac DR
profit and loss ac DR
bonus to shareholders ac CR.
4.making final call due
share final call ac DR.
share capital ac CR
5. adjustment of final call
bonus to shareholders ac DR
share final call ac CR..
could you please explain me elaborately of this journal Entries transactions why it is in debit why it is in credit how to judge as per golden rules of accounting please explain with the golden rules of accounting this general entries
The entries follow the golden rules of accounting, which are:
- Debit what comes in, credit what goes out
- Debit all expenses and losses, credit all incomes and gains
- Debit the receiver, credit the giver.
- Sanction of issue of bonus shares:
Capital Redemption Reserve A/c Dr. (debit) - represents the amount transferred from profits for the purpose of redeeming share capital
Securities Premium A/c Dr. - represents the amount received in excess of face value of shares issued
General Reserve A/c Dr. - represents the amount transferred from profits to a general reserve fund
Profit and Loss A/c Dr. - represents the amount of profits available for appropriation
Bonus to Shareholders A/c Cr. (credit) - represents the amount of bonus shares to be issued to shareholders.
The above entries are made to account for the appropriation of profits for the purpose of issuing bonus shares to shareholders. All the accounts are debited to reduce the balance of the profit and loss account and to increase the reserves.
- Issue of bonus shares:
The above entries are made to record the issue of bonus shares to the shareholders. Bonus to shareholders account is debited to reduce its balance and share capital account is credited to increase the share capital.
- Partly paid to fully paid:
The above entries are made when partly paid shares are converted to fully paid shares through the issue of bonus shares. The accounts are debited to reduce the balance of the profit and loss account and to increase the reserves.
- Making final call due:
The above entries are made when the final call is due on shares. Share final call account is debited to increase the liability and share capital account is credited when the shareholders pay the final call.
- Adjustment of final call:
The above entries are made when the final call is adjusted with the bonus shares issued to shareholders. The bonus to shareholders account is debited to reduce its balance and share final call account is credited to reduce the liability.
CAclubindia
