## Bonus Shares under AS 13
### What Are Bonus Shares?
Bonus shares are additional shares issued by the company to existing shareholders at zero cost — funded out of the company's reserves. The shareholder pays nothing.
---
### Accounting Rule
| Item | Treatment |
|---|
| Number of shares | Increases |
| Cost of investment | No change (Amt = ₹0) |
| Cost per share | Falls (same total cost, more shares) |
```
Investment A/c Dr [No. of shares added] [Amt = ₹0]
To Bonus Shares A/c [₹0]
```
In the ledger: add shares in the No. of Shares column; enter ₹0 in the Amt column.
---
### Revised Cost Per Share After Bonus
$$\text{New cost per share} = \frac{\text{Total cost (unchanged)}}{\text{Old shares + Bonus shares}}$$
This revised cost per share is used for all subsequent sale calculations.
---
### Bonus Ratio
Bonus is always declared on shares held on the record date — this includes any shares purchased during the year before the bonus date.
Example: 15,000 + 5,000 = 20,000 shares eligible. Bonus ratio 1:5 → 20,000 ÷ 5 = 4,000 bonus shares.
### Example 1
Example – Bonus Shares Followed by Sale (Q23 CDR)
Data:
- 01.04.Y1: Purchased 1,000 equity shares @ ₹120 each (FV ₹100), Brokerage 2%, Share transfer fees 0.5%
- 31.01.Y2: Bonus declared 1:2
- 31.03.Y2: Sold 500 shares @ ₹90, Brokerage 2%
- Nature: Current investment
Step 1 – Cost of 1,000 shares:
```
Purchase price: 1,000 × 120 = 1,20,000
Brokerage @ 2%: 1,20,000 × 2% = 2,400
Share transfer fees: 1,20,000 × 0.5% = 600
Total cost: 1,23,000
Cost per share: 1,23,000 ÷ 1,000 = ₹123
```
Step 2 – After Bonus (1:2 ratio):
```
Bonus shares received: 1,000 ÷ 2 = 500 shares @ ₹0
Total shares: 1,000 + 500 = 1,500
Total cost: ₹1,23,000 (unchanged)
New cost per share: 1,23,000 ÷ 1,500 = ₹82
```
Step 3 – Sale of 500 shares:
```
Sale proceeds: 500 × 90 = 45,000
Less: Brokerage @ 2%: ( 900)
Net sale proceeds: 44,100
Cost of 500 shares: 500 × 82 = 41,000
Profit: 3,100
```
Journal Entry:
```
CIB A/c Dr 44,100
To Investment A/c 41,000
To P&L (Profit) 3,100
```
Ledger (Invest. in Eq. Shares):
| Particulars | Shares | Amt | Particulars | Shares | Amt |
|---|
| To Bank (Purchase) | 1,000 | 1,23,000 | By CIB (Sale) | 500 | 44,100 |
| To Bonus Shares | 500 | 0 | By Bal c/d | 1,000 | 82,000 |
| To P&L (Profit) | — | 3,100 | | | |
| Total | 1,500 | 1,26,100 | Total | 1,500 | 1,26,100 |