The correct answer is "No overall change in total equity."

Here's why:

1. A bonus issue of shares is essentially a form of dividend where a company distributes additional shares to shareholders instead of cash.

2. These additional shares are issued to the existing shareholders for free, in proportion to their current shareholding.

3. The company funds these bonus shares by transferring amounts from its reserves (retained earnings or share premium account) to its issued share capital.

4. Therefore, while the amount of issued share capital increases, there is a corresponding decrease in the company's reserves.

5. As a result, there is no overall change in the total equity of the company. The equity is just redistributed between various components.

6. So, while the number of shares in circulation increases, the total value of equity remains the same.

Question

The correct answer is "No overall change in total equity."

Here's why:

1. A bonus issue of shares is essentially a form of dividend where a company distributes additional shares to shareholders instead of cash.

2. These additional shares are issued to the existing shareholders for free, in proportion to their current shareholding.

3. The company funds these bonus shares by transferring amounts from its reserves (retained earnings or share premium account) to its issued share capital.

4. Therefore, while the amount of issued share capital increases, there is a corresponding decrease in the company's reserves.

5. As a result, there is no overall change in the total equity of the company. The equity is just redistributed between various components.

6. So, while the number of shares in circulation increases, the total value of equity remains the same.

Knowee AI · Accepted Answer

The correct answer is "No overall change in total equity."

Here's why:

1. A bonus issue of shares is essentially a form of dividend where a company distributes additional shares to shareholders instead of cash.

2. These additional shares are issued to the existing shareholders for free, in proportion to their current shareholding.

3. The company funds these bonus shares by transferring amounts from its reserves (retained earnings or share premium account) to its issued share capital.

4. Therefore, while the amount of issued share capital increases, there is a corresponding decrease in the company's reserves.

5. As a result, there is no overall change in the total equity of the company. The equity is just redistributed between various components.

6. So, while the number of shares in circulation increases, the total value of equity remains the same.

A bonus issue of shares to existing shareholders has which of the following impacts on the equity of a company? Total equity increases. Total equity decreases. No overall change in total equity. Only the amount of issued share capital changes.

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