Capital Increase question.?

Question

When a company does a capital increase by issuing bonus shares, do I have to add the money it gets (price*number of new shares) in Equity like I do when it is a capital increase with cash or not?

Answer 1

You don't get money by issuing bonus shares, the way you do with a rights issue. When you issue bonus shares, you just
Dr Retained earnings
Cr Share capital

The following article may be of interest to you. The complete article can be accessed at the link.

What is Bonus Issue?

* A bonus issue is the issue of new ordinary shares at no cost to existing shareholders, but out of the company’s reserves and in direct proportion to their existing shareholdings in the company.
* Bonus issues are used to enlarge the capital base of the company and also as a means of rewarding existing shareholders.
* A bonus issue is normally done via retained earnings. Bonus issue is just a book entry shifting from retained profit to share capital. This is also known as capitalization of reserves.
* Rewarding shareholders via a share split such as issuing bonus shares did not have any effects from the balance-sheet perspective.
* The issuance of bonus shares is governed by specific rules and regulations and importantly, a company must have adequate reserves on the balance sheet.

Answer 2

Yes that sounds about right. This maybe different if you are asking a tax question.