Bonus Shares Journal Entries
@maaccountinghub
Bonus Shares Journal Entries:
In this video you will learn the basic concept of bonus shares journal entries.
Bonus shares are free shares issued to existing shareholders in proportion to their current holding. They are distributed from the company's accumulated profits or reserves.
Journal Entries:
1- When the company's board of directors approves the issuance of bonus shares, the following journal entry is made:
Debit: Profit and Loss Account, General Reserve, Securities Premium, or other reserves
Credit: Bonus to Shareholders Account
This entry transfers the amount of the bonus shares from reserves to a temporary account called "Bonus to Shareholders Account".
2- Once the bonus shares are issued to shareholders, the following journal entry is made:
Debit: Bonus to Shareholders Account
Credit: Share Capital Account
This entry capitalizes the bonus shares by transferring the amount from the "Bonus to Shareholders Account" to the "Share Capital Account".
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