Dallkin Company issued 10,000 ordinary shares on 1 January 2016.The shares were sold at $25 per share.The journal entry for this transaction would include a:

Question

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When a company issues shares, it receives cash in return, which is recorded as a debit to Cash. At the same time, the company's equity increases due to the issuance of new shares, and this is recorded as a credit to Ordinary share capital. Therefore, the correct journal entry would be to debit Cash for $250,000 and credit Ordinary share capital for $250,000. Retained earnings would not be affected by this transaction as it represents accumulated profits that are not related to the issuance of new shares.

Dallkin Company Issued 10,000 Ordinary Shares on 1 January 2016