Question 2.5 A company issued 100 000 ordinary shares (with a par value of Cl) at an issue price of

Question 2.5

A company issued 100 000 ordinary shares (with a par value of Cl) at an issue price of C1.20 each during the year. The following is the journal entry passed by the accountant:

Dr

Cr

Bank

120 000

100 000

Share capital

20 000

Share premium

Required:

State what element the credit entries represents. Discuss, by way of a process of elimination, the reason for your answer. A discussion of the relevant definitions provided in The Framework is required.

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