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WAEC Financial Accounting 2014 Question 30

Question 30

Company Accounts

When shares are issued above their nominal value, the excess above the nominal value is

  1. A.credited to Profit and Loss Account.
  2. B.debited to Share Premium Account.
  3. C.credited to Share Capital Account.
  4. D.credited to Share Premium Account.
Show the answer and explanation

Answer: D (credited to Share Premium Account.)

Explanation

The extra amount received above nominal value is a share premium, credited to the Share Premium Account (a capital reserve).