CS Executive · Corporate Accounting and Financial Management · Related Aspects of Company Accounts
Under the Companies Act, 2013, which of the following reserves cannot be capitalised for issuing fully paid-up bonus shares?
Reserves created by revaluation of assets cannot be capitalised for bonus shares. The Companies Act allows bonus issues only from free reserves, securities premium or capital redemption reserve, and the proviso expressly prohibits using revaluation reserve because it is unrealised.
- ASecurities premium account
- BCapital redemption reserve account
- CFree reserves
- DReserves created by revaluation of assetsCorrect
Explanation
Section 63(1) permits bonus shares out of free reserves, the securities premium account or the capital redemption reserve account. The proviso bars capitalising reserves created by revaluation of assets. The other three are expressly permitted sources.
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