Question

Shareholders paying cash to purchase shares in a company increases:

Select one:

a. liabilities and equity.

b. assets and equity.

c. assets only.

d. assets and liabilities.

Answer 1

When shareholder pay the cash to purchases shares, Cash would be entered and increased in business and cash came in form of equity capital therefore it would be increased too.

Journal entry will be

Debit : Cash xxxx (Increased)

Credit : Common stock (equity) xxxx (increased)

Cash will be shown in assets side of balance sheet that have debit and Common stock will be shown shareholder's equity section in balancesheet that have credit balance.

Option b "Assets and equity" is Correct.