When new shares are sold at a price greater than par value, the excess over par is recorded as:

Question

Quizplus · Accepted Answer

The excess amount over the par value of the shares sold is called the capital surplus, which is credited to the capital surplus account. This account reflects the amount required for the company to meet its future financial needs or boost its financial status. When shares are issued at a premium, the extra money obtained is not considered to be earnings, but rather a surplus of capital that can be used to pay off debts or invest in business operations. Therefore, choice A is the correct option.

When New Shares Are Sold at a Price Greater Than