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The journal entry to record further receipts of cash due on the allotment of shares will include which of the following line items? DR Allotment DR Share capital CR Allotment CR Cash

Question

The journal entry to record further receipts of cash due on the allotment of shares will include which of the following line items? DR Allotment DR Share capital CR Allotment CR Cash

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Solution

The journal entry to record further receipts of cash due on the allotment of shares will include the following line items:

  1. Debit (DR) Allotment: This is the amount that is still due from the shareholders who have not yet paid their share of the allotment. This increases the allotment account, which is an asset account.

  2. Credit (CR) Cash: This is the amount of cash received from the shareholders who have paid their share of the allotment. This increases the cash account, which is also an asset account.

The journal entry does not include a debit to Share Capital or a credit to Allotment. Share Capital is only debited when the company issues new shares, and Allotment is only credited when the company receives payment for shares that have been allotted.

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