Which among the following represents capitalisation of profits?

Answer: [C] Bonus Shares

Profit making companies when desire to convert their profit into share capital, they do this by issue of bonus shares. Issue of Bonus shares is also called as conversion of profit into share capital or capitalisation of profits. Bonus can be of two types:

  1. Making partly paid shares into fully paid by declaring bonus without requiring shareholders to pay for the same
  2. Issue of fully paid equity shares as bonus shares to the existing equity shareholders

This question is a part of GKToday's Integrated IAS General Studies Module