On 1 November Yasmine Company Pty Ltd issued 100 000 shares for $5 each. The correct entry to record this transaction is:
A) DR Cash $500 000; CR Shareholder's equity $500 000.
B) DR Cash $500 000; CR Share capital $500 000
C) DR Cash $500 000; CR Share capital $500 000.
D) DR Shareholder's equity $500 000; CR Cash $500 000

Question

Quizplus · Accepted Answer

When a company issues shares, the amount received is recorded as share capital. Therefore, the correct entry to record this transaction is to debit cash for the amount received ($500,000) and credit share capital for the same amount. Option B correctly reflects this. Option A is incorrect because it does not specify which account within shareholder's equity should be credited. Option C has the same issue as option A, and it is also incorrect because it implies that cash is being recorded as shareholder's equity. Option D is incorrect because it has the wrong account debited.

On 1 November Yasmine Company Pty Ltd Issued 100 000