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Bonus issue

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Bonus issue

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.
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  • January 5, 2019 at 10:25 am #500059
    yusra97
    Participant
    • Topics: 66
    • Replies: 61
    • ☆☆

    Issued share capital is brought more into line with assets employed in the entity ?
    Sir what does this mean? This is an advantage of a bonus issue..

    January 5, 2019 at 11:34 am #500071
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54835
    • ☆☆☆☆☆

    A bonus issue increases the share capital (and reduces reserves).
    Given that capital + reserves is always equal to the net assets, then increasing the capital and reducing the reserves automatically means that the share capital is nearer to the net assets.

    (However, although I don’t know from where you are quoting this, it is not really much of an advantage – the total shown as owing to shareholders is capital + reserves, and this total does not change.)

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