Which of the following entries records the cash sale of capital stock to stockholders?
A) debit Capital Stock; credit Cash
B) debit Cash; credit Capital Stock
C) debit Cash; credit Revenue
D) debit Revenue; credit Cash

Question

Quizplus · Accepted Answer

The sale of capital stock generates cash inflow, so Cash should be debited. At the same time, Capital Stock account should be credited to reflect the increase in equity due to the sale of new shares to stockholders. Option A and option C are incorrect because Revenue should not be recognized when capital stock is sold, as capital stock is not an operating revenue-generating activity. Option D is incorrect because it records revenue where there is none, and does not reflect the change in equity from the sale of capital stock.

Which of the Following Entries Records the Cash Sale of Capital