Which of the following can be utilized for issue of bonus shares 1 Balance of profits amp loss accou...........

Principles of Accounting & Financial Management Bonus and Right issue

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Which of the following can be utilized for issue of bonus shares?

1. Balance of profits & loss account

2. Capital Reserve

3. Dividend Equalization Fund

4. Development Rebate Reserve

5. Profit Prior to Incorporation

Select the correct answer from the options given below –

1, 3 and 5 only

2 and 4 only

1 and 3 only

1, 2, 3 and 5 only

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Explanation:

1 and 3 only

The company can issue bonus shares from unissued capital by using the free reserves or security premium account or the capital redemption reserve account. However now it is settled law. No bonus shares can be issued by capitalizing reserves created by the revaluation of assets.