Question

When shares are issued to promoters not for their services, which account is debited?

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

Answer 1

The correct option is B Promoters A/c

Issue of shares to refers to a company offering shares to the public in exchange for capital. It invites the applications from the public. After obtaining the minimum subscription it allots the shares to the applicants. On allotment, the title on the shares passes to the shareholders. However, in some cases, a company may also issue the shares for consideration other than cash to the promoters as they promote the company.

A company can also issue shares to the promoters or the lawyers or other people for rendering services in the formation of the company. Such services could be in way of technical assistance, legal guidance, engineering services, designing of plant layout, etc.