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CA Intermediate · Advanced Accounting · AS 20 Earnings Per Share

Narmada Chemicals Ltd had 5,00,000 equity shares on 1 April 2025. On 1 October 2025 it issued bonus shares in the ratio 1:5. On 1 January 2026 it issued 60,000 shares for cash at full market price. Net profit for the year ended 31 March 2026 is Rs 12,30,000. What is the basic EPS for the year?

Basic EPS is Rs 2.00. A bonus issue is adjusted as if made at the beginning of the period, so opening shares become 6,00,000. The January cash issue adds 15,000 weighted shares. Dividing Rs 12,30,000 by 6,15,000 gives Rs 2.00.

  1. ARs 2.00Correct
  2. BRs 2.18
  3. CRs 2.39
  4. DRs 2.05

Explanation

Bonus shares are issued without consideration, so they are treated as outstanding from the start of the earliest period: 6,00,000 shares. The cash issue is weighted 3/12: 60,000 x 3/12 = 15,000. Weighted shares = 6,15,000. EPS = 12,30,000 / 6,15,000 = Rs 2.00. Rs 2.18 wrongly weights the bonus from 1 October.

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