ACCA FA · Chapter 9 · Question 3 of 10
Which of the following statements about a bonus issue of shares is correct?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) It does not raise any cash for the company
Explanation
A bonus (capitalisation) issue converts reserves, such as share premium or retained earnings, into share capital. No cash is received, and total equity is unchanged because one component of equity increases while another decreases. Issuing shares for cash to existing shareholders at a discount describes a rights issue.
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