Bonus share journal entry. Bonus shares are additional shares given to existing shareholders without any additional cost, based on the number of shares that a shareholder already owns. Issuing bonus shares increases the number of shares but does not affect the company’s cash position.
Key Concepts
- Share Capital Account: The account representing the company’s issued share capital.
- Bonus Share Issue Account: The account used to record the value of the bonus shares issued.
- Retained Earnings Account: The account representing the company’s accumulated profits.
Journal Entry for Bonus Shares
Example Scenario
Assume a company decides to issue bonus shares worth ₹100,000 on 30-11-2023, using its retained earnings.
Step-by-Step Journal Entry
- Record the Issue of Bonus Shares
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 30-11-2023 | Retained Earnings | 100,000 | Transfer to bonus shares | |
| 30-11-2023 | To Share Capital | 100,000 | Issuance of bonus shares |
Explanation
- Debit to Retained Earnings: This decreases the retained earnings account, reflecting the use of accumulated profits to issue bonus shares.
- Credit to Share Capital: This increases the share capital account, reflecting the addition of new shares issued to existing shareholders.
Conclusion
Issuing bonus shares is a way for companies to reward shareholders without affecting their cash flow. Accurately recording the issuance of bonus shares is essential for maintaining precise financial records and ensuring correct representation of share capital and retained earnings. Properly managing these transactions ensures that the company’s equity is accurately represented in the financial statements, contributing to better financial management and reporting.
sir i am investor we have received bonus share. let me know how is bonus share entry in tally prime
1. Create a Ledger for Bonus Shares
Go to Gateway of Tally > Accounts Info > Ledgers > Create.
Name the ledger as Bonus Shares.
Under the Group, select Investments.
Set Inventory values are affected to No.
2. Create an Entry for Bonus Shares
Navigate to Accounting Vouchers.
Select Journal Voucher (F7).
Pass the following journal entry:
Date Particulars Debit Credit
Investments (Bonus Shares) Debit [Value of Bonus Shares]
To Share Capital Account Credit [Value of Bonus Shares]
Explanation:
Investments (Bonus Shares) will debited because your investment increases due to the bonus shares received.
Share Capital Account will credited because the company’s equity increases with the issue of bonus shares.