CA Inter P2 · Chapter 4 · Question 9 of 11
Orbit Ltd has: free reserves ₹40 lakh, securities premium ₹15 lakh, capital redemption reserve ₹10 lakh and revaluation reserve ₹25 lakh. What is the maximum amount it can capitalise for fully paid bonus shares under section 63?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) ₹65 lakh
Explanation
Section 63(1) permits bonus shares to be issued only out of free reserves, the securities premium account and the capital redemption reserve account. The proviso to section 63(1) bars capitalising reserves created by revaluation of assets. Maximum = 40 + 15 + 10 = ₹65 lakh.
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