Accounting recognition must be given to common share subscriptions on the subscription date:
A)because all events relating to the common share accounts must be disclosed.
B)because a legal contract is involved.
C)because the dollar amount is usually large.
D)to guarantee the receipt of dividends subsequent to the subscription date.

Question

Quizplus · Accepted Answer

The correct answer is B because when a common share subscription is made, a legal contract is established between the company issuing the shares and the subscriber. This legal agreement obligates the subscriber to purchase the shares at a specified price, and the company to issue those shares, necessitating accounting recognition on the subscription date.

Accounting Recognition Must Be Given to Common Share Subscriptions on the Subscription