Which of the following reserves is not used for bonus shares?
Answer Details
Capital Redemption Reserve Fund is not used for bonus shares.
Explanation:
Bonus shares are new shares issued by a company to its existing shareholders without any additional cost, based on the accumulated profits of the company. These accumulated profits are generally taken from the company's reserves.
The reserves that are typically used for issuing bonus shares are:
1. Capital Reserve: This reserve is created when a company sells its fixed assets or investments at a profit.
2. General Reserve: This reserve is created out of the company's profits and is not specifically earmarked for any purpose.
3. Share Premium: This is the amount received by the company over and above the face value of the shares issued.
4. Revaluation Reserve: This reserve is created when the value of the company's assets is revalued upwards.
Capital Redemption Reserve Fund, on the other hand, is a reserve created out of the profits of the company to be used for the redemption of the company's redeemable preference shares or debentures. This reserve cannot be used for issuing bonus shares.