On 1 January Make More Company Pty Ltd issued 10 000 shares for $3 each. Which of the following is the correct entry to record this transaction?
A) Debit bank $30 000; credit shareholder's equity $30 000
B) Debit bank $10 000; credit share capital $10 000
C) Debit bank $30 000; credit share capital $30 000
D) Debit share capital $10 000; credit bank $10 000

Question

Quizplus · Accepted Answer

When a company issues shares, the money received goes into the share capital account. In this case, Make More Company Pty Ltd issued 10 000 shares for $3 each, which means they received $30 000 in total. Therefore, the correct entry would be to debit bank (or cash) for $30 000 and credit share capital for $30 000. Option A is incorrect because shareholder's equity is a broad account that includes other items such as retained earnings, which should not be impacted by the issuance of shares. Option B is incorrect because it only records the value of one share, not the total amount received. Option D is incorrect because it records the transaction the wrong way around, with the money going out of the share capital account instead of into it.

On 1 January Make More Company Pty Ltd Issued 10