bonus shares are the ones the company management gives to the shareholders just like dividend hence there is no cash gained as in rights issue. with the rights issue, there is more cash gained by whoever is offering the rights.

capital reserves ni ile profit the company held back after paying some of it off as dividends.. this fund is lumped with share capital to form Shareholders' equity

if a company needs to increase its capital base up it can do two things..actually more than two..

+ it can call up the Reserve capital from shareholders..

+ it can issue new shares thro a rights issue

or instead of those two tedious methods..

+ it can look at its balance sheet..notice that the capital reserve account seems to have loads of funds lying dormant..and then request shareholders whether it can issue bonus to them..
Guaranteed, shareholders say yes.. so the company issues more shares to shareholders.. and then they TAKE THE EQUIVALENT MONEY AMOUNT FROM THE CAPITAL RESERVE AND MOVE IT TO AUTHORIZED CAPITAL...GIVING THEM....MANAGEMENT... ACCESS TO EXTRA CAPITAL FUNDS FOR THE BUSINESS.

@milken @proverB thanks a dozen. Long live wazua

I think with the bonus issue, the company may not actually realize the tangible cash as some times by the the time bonus issues are announced, the net cash value on the balance sheet may be less than the amount carried off the revenue reserves. Although, i think its a neat way of avoiding taxes and other cost. Especially if the company has been holding back the dividends for the past years.