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JAMB Principles of Accounts 1999 Question 41

Question 41

Company Accounts

If a promoter pays a lawyer ₦5,000 for services rendered in preparing a Memorandum of Incorporation, the journal entry is to debit

  1. A.preliminary expenses, credit cash accounts
  2. B.promoter, credit creditors' accounts
  3. C.lawyer's credit cash accounts
  4. D.cash, credit incorporation accounts.
Show the answer and explanation

Answer: A (preliminary expenses, credit cash accounts)

Explanation

Costs of forming a company are preliminary expenses: debit preliminary expenses, credit cash.