Question

When shares are issued to promoters for their services, the account that will be debited is ______________.

• A. Preliminary Expenses A/c
• B. Goodwill A/c
• C. Promoters A/c
• D. Share Capital A/c

Answer 1

The correct option is B Goodwill A/c

The company debits this amount to the Goodwill Account as it will derive the benefit of these services for a long period of time. Hence, it treats this expense as a capital expenditure. It thus needs to show the ‘shares issued for consideration other than cash’ separately under the heading ‘Share Capital’.