Question : Which of the following reserves are not available for issue of fully paid bonus shares?
Option 1: Capital reserve arising due to revaluation
Option 2: Dividend Equilization Reserve
Option 3: Profit and Loss Account
Option 4: Capital Redemption Reserve
Correct Answer: Capital reserve arising due to revaluation
Solution :
Capital reserves arising due to revaluation are not available for the issue of fully paid bonus shares.
Some of the authorized uses of capital reserve under the Companies Act, 2013 include:
1. Issue of Bonus Shares: Companies can utilize capital reserve to issue bonus shares to existing shareholders as a form of reward or incentive. Bonus shares are issued to shareholders without any additional cost, and capital reserve can be used to capitalize profits for the purpose of issuing bonus shares.
2. Writing off Preliminary Expenses: Capital reserve can be used to write off preliminary expenses incurred by the company during its formation or incorporation. Preliminary expenses include costs associated with the incorporation of the company, such as legal fees, registration expenses, and other administrative costs.
Hence the correct answer is option 1.
