Bonus Shares after Buy Back – Using CRR

## Issue of Bonus Shares after Buy Back / Redemption

### Concept

After buy back or preference redemption, the accumulated CRR (and other free reserves) can be capitalised to issue fully paid-up bonus shares to existing equity holders at no cost.

### Journal Entries

Step 1 – Declare bonus shares

```

Capital Redemption Reserve A/c Dr [Nominal value of bonus shares]

General / Revenue Reserve A/c Dr [If CRR insufficient]

To Bonus to Shareholders A/c [Total nominal value]

```

(Sources used in order: CRR → General Reserve → Revenue Reserve → P&L Surplus)

Step 2 – Issue shares

```

Bonus to Shareholders A/c Dr [Nominal value]

To Equity Share Capital A/c [Nominal value]

```

### Effect on Share Capital

```

Equity Share Capital (post BB) = Opening – Bought Back

Equity Share Capital (post Bonus) = (Opening – Bought Back) + Bonus Shares Issued

```

### Effect on Reserves

• CRR decreases by nominal value used for bonus
• Share capital increases by same amount
• Total equity stays the same (capitalisation, not payment)

### Bonus Ratio Calculation

If shares post-buy-back = N and bonus ratio is 1:k, bonus shares = N / k.

Key check: The source used for bonus must be a free reserve or CRR — not Securities Premium (unless SEBI rules specifically permit for listed companies).