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JAMB Principles of Accounts 1999 Question 43

Question 43

Purchase of Business

Shares issued to a vendor in payment of business purchased would require a debit to

  1. A.cash account and credit to share capital account
  2. B.share capital account and credit to vendor's account
  3. C.vendor's account and credit to share capital account
  4. D.share capital account and credit to cash account.
Show the answer and explanation

Answer: C (vendor's account and credit to share capital account)

Explanation

Issuing shares settles the debt to the vendor: debit vendor, credit share capital.