Day: August 8, 2024

Alex plc issued 50,000 equity shares of 25p each at a premium of 50p per share.

The cash received was correctly recorded but the full amount was credited to the equity share capital account.

Which of the following journals corrects this error?

Select ONE answer:

1. Debit Share premium £25,000, Credit Share capital £25,000
2. Debit Share capital £25,000, Credit Share premium £25,000
3. Debit Share capital £37,500, Credit Share premium £37,500
4. Debit Share capital £25,000, Credit Cash at bank £25,000

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Notcorrect
2. Correct  –> This is the transfer of the premium to the share premium account.
3. Not correct
4. Not correct

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