Question

When a proportion of reserves is distributed among shareholders as shares it is known as?

Answer 1

Solution :-

The proportion of reserves is distributed among shareholders as shares is known as 'Bonus Shares'. 

Bonus Shares -

When a company possess the huge amount of distributable profits, the company transforms such profits into capital and divides it among its shareholders in the proportion of their holdings. For which, the existing shareholders are not required to pay anything. These are called bonus shares. 

Generally, the company issue bonus shares out of accumulated profits or reserves to the existing shareholders. Since, the profit or reserve is being capitalized so, it is also called capitalization of profit or reserve. As the company cannot receive cash from the shareholders for the purpose of issuing bonus shares, a sum equal to the total value of bonus issue is to be adjusted against profit or reserve and transferred to Equity Share Capital Account.

Answer 2

Question

When a proportion of reserves is distributed among shareholders as shares it is known as?

This is called Bonus.

• Shareholders are the individuals who have got he share on a given company and have a say.

• There are full members and the Quasi members in a company.

• The bonus are the reserves that re distributed to the shareholders .

They are used in ways to promote:

Used as motivational factors to encourage and reward members on the success and the prowess of the company.

They are used to show the validity and the continuation of the business of the company.

The same bonus are used as a payment on the contribution that the shareholders get as a interest earn on heir shares that they bought.

This distribution is done on a specific manner and then can be done in a yearly or half basis.