High Country Ltd issued 50 000 shares for $1 each on 23 May. The correct entry to record this transaction is:

Question

Quizplus · Accepted Answer

When a company issues shares, it receives cash from the shareholders. The correct entry to record this transaction is to debit (DR) Bank for the amount of cash received and credit (CR) Share capital for the amount of shares issued at the issue price. Choice B is incorrect as Shareholder's equity is a broad category that includes several sub-accounts, including Share capital. Choice C is incorrect as Retained earnings would only be affected if the company had previously earned profits and chose to retain them rather than distribute them as dividends. Choice D is incorrect as it records the transaction in reverse (debiting Share capital instead of Bank).

High Country Ltd Issued 50 000 Shares for $1 Each