Which of the following is the appropriate journal entry to record the cash collected from applicants for shares before the shares are actually issued?
A) Increase cash trust account: increase share capital account
B) Increase application account: decrease share capital account
C) Increase share capital account: decrease cash trust account
D) Increase cash trust account: increase application account

Question

Quizplus · Accepted Answer

Before shares are actually issued, companies may ask for cash from applicants to secure their commitment to purchasing shares. This cash is collected in a trust account until the shares are issued. The appropriate journal entry to record this transaction would be to increase the cash trust account (as the cash is being received) and increase the application account (as the application is being received). Therefore, the correct answer is D: Increase cash trust account: increase application account.

Which of the Following Is the Appropriate Journal Entry to Record