GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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There should be a provision in the ____of the company for capitalisation of reserves
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Prospectus
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Articles of Association
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Memorandum of Association
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None of these
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Explanation:
Detailed explanation-1: -(1) The process of issuing the bonus shares out of the company’s profits or reserves is known as “Capitalisation of Profits or Reserves. (2) It is a reward to shareholders, distributed in proportion to the number of shares each owns. The process has no impact on a corporation book value.
Detailed explanation-2: -Issue of Bonus Shares Bonus Shares are issued by way of capitalisation of profits or reserves of the Company. It is also popularly known as “Capitalisation Shares” as these shares are issued on capitalisation of profits or reserves. The main purpose is to broad base the share capital of the Company.
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