Debit retained earnings, credit share capital, credit share premium account is the correct double entry to record a rights issue of shares.

Question

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The correct double entry for a rights issue of shares typically involves debiting the bank account (to reflect the inflow of cash from shareholders) and crediting share capital (for the nominal value of the shares issued) and share premium account (for the amount received in excess of the nominal value). Retained earnings are not affected by a rights issue.

Debit Retained Earnings, Credit Share Capital, Credit Share Premium Account