CS Executive · Corporate Accounting and Financial Management · Accounting for Share Capital
Under the Companies Act, 2013, which of the following reserves CANNOT be capitalised for issuing fully paid-up bonus shares?
A reserve created by revaluation of assets cannot be capitalised for bonus shares. The Companies Act, 2013 allows bonus issues only from free reserves, securities premium account or capital redemption reserve, and its proviso prohibits using revaluation reserves because they are unrealised gains.
- ASecurities premium account
- BCapital redemption reserve account
- CFree reserves
- DReserve created by revaluation of assetsCorrect
Explanation
Section 63 permits bonus shares out of free reserves, the securities premium account or the capital redemption reserve account. The proviso expressly bars capitalising reserves created by revaluation of assets. The other three sources are specifically permitted.
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