Tag: Capital

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

This work is licensed under a Creative Commons Attribution 4.0 International License.

Alex plc made an issue of shares for cash of 1,000,000 * 50p shares at a premium of 30p per share.

Which of the following general journals correctly records the issue of new shares?

Select ONE answer:

1. Debit Share capital £500,000, Debit Share premium £300,000, Credit Cash at bank £800,000
2. Debit Cash at bank £800,000, Credit Share capital £500,000, Credit Share premium £300,000
3. Debit Cash at bank £1,300,000, Credit Share capital £1,000,000, Credit Share premium £300,000
4. Debit Share capital £1,000,000, Debit Share premium £300,000, Credit Cash at bank £1,300,000

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  –> Share capital will be credited with the nominal value of the shares (1m × 50p) – the balance goes to share premium (1m × 30p).
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

At the 30 June 2023 Alex plc had the following balances:

• Equity shares of £1 each £100M
• Share premium account £80M

During the year ended 30 June 2024, the following transactions took place:

• 1 September 2023: a 1 for 2 bonus issue of equity shares, using the share premium account.
• 1 January 2024: a 2 for 5 rights issue at £1.50 per share, taken up fully paid.

What are the balances on each account as at 30 June 2024?

Select ONE answer:

1. Share Capital £210M and Share Premium Account £110M
2. Share Capital £210M and Share Premium Account £60M
3. Share Capital £240M and Share Premium Account £30M
4. Share Capital £240M and Share Premium Account £80M

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  –> Shareholders do not have an  automatic right to be a director or to be involved in management (3).  The partners’ individual shareholdings will be determined by an agreement that is not necessarily related to the existing partnership agreement (1). The concept of perpetual succession means that the company will not dissolve upon the death of a shareholder (4).
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.