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hey EO.
my question is when we issue shares as bonus issue then we pass the entry: Dr: share premieum Cr: share capital.. now why we debit share premieum?Because the bonus has to be financed from somewhere and it’s not a matter of cash being received. Where else do you want the debit to go? Incidentally, it’s not always debit share premium. It could be another of the statutory capital reserves – the Capital Redemption Reserve. In addition, it could be debited to retained earnings, plant replacement reserve, general reserve – in fact, any of the distributable reserves. It just makes most commercial sense to debit the corresponding entry to a statutory capital non-distributable reserve and that, typically in F7, is the share premium account
Ok?
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