Page 216 - Microsoft Word - 00 BA3 IW Prelims STUDENT.docx

Chapter 11

2.3 Bonus issue

A bonus issue is a 'free' issue of shares to current shareholders in proportion to their
existing shareholding i.e. the company receives no cash or any other consideration in
exchange for the share issue. In effect, it is a way for the company to capitalise its
reserves and increase the number of shares in issue.

The accounting entries to record the share issue would be:

Debit Share premium/retained earnings (nominal value × no. of shares)

Credit Share capital account (nominal value × no. of shares)

210