How is cash invested by shareholders in exchange for shares initially recorded in the accounting records?
A)As an increase in retained earnings, and an increase in cash.
B)As an increase in long-term investments, and a decrease in cash.
C)As an increase in common shares, and a decrease in cash.
D)As an increase in common shares, and an increase in cash.

Question

Quizplus · Accepted Answer

When shareholders invest cash in exchange for shares, it is recorded as an increase in common shares (equity) and an increase in cash (asset). This reflects the inflow of cash and the issuance of equity to the shareholders.

How Is Cash Invested by Shareholders in Exchange for Shares