Question

4,000 Equity Shares of ₹10 each were issued at 8% premium to the promoters of a company for their services. Which account will be debited?

Options

• Share Capital Account

• Goodwill Account/Incorporation Cost Account

• Securities Premium Account

• Cash Account

Answer 1

Goodwill Account/Incorporation Cost Account

Explanation:

When shares are issued to promoters for their services, the services received are considered a form of intangible asset or incorporation expense. Therefore, the debit is made to Goodwill Account (or Incorporation Cost Account) instead of Cash, since no money is paid, but services are received.