Difference between the issue of shares, a rights issue and a bonus issue, and recording the effect in financial statements
A limited company can raise or reorganise its share capital in three ways. Each method affects the statement of financial position differently.
Formula
Share Premium = (Issue Price − Nominal Value) × Number of Shares Issued
Real World
When Royal Mail floated on the London Stock Exchange in 2013, shares with a nominal value of pennies were sold at 330p each, generating a large share premium for the company's balance sheet.
Exam Focus
State whether cash increases — it does for ordinary and rights issues but not for bonus issues, a common mark-scheme distinction.
Essay Framework
Use PEEL to structure every paragraph. Tap each step for guidance and an example.
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