Correct Option: A Explanation of Why Option A is Correct: When shares are issued and paid for, the company receives cash or bank deposits in exchange for the shares. This transaction affects two main accounts in the company's financial records: the cash or bank account and the share capital account (which may also include a share premium account if shares are issued at a price above their nominal value).

1. Debit Bank or Cash Account:
2. When shares are issued, the company receives cash or a bank deposit. In accounting, receiving cash is recorded as a debit to the cash or bank account. This reflects an increase in the company's assets because cash is an asset.
3. Credit Share Capital and/or Premium Account:
4. The corresponding entry is to credit the share capital account. This reflects an increase in the equity of the company, as issuing shares increases the ownership stake of shareholders. If the shares are issued at a premium (above their nominal value), the excess amount is credited to a share premium account.

Thus, the complete journal entry for issuing shares for cash would look like this:

• Debit: Bank or Cash Account (for the amount received)
• Credit: Share Capital Account (for the nominal value of shares issued)
• Credit: Share Premium Account (if applicable, for any amount received above the nominal value)

Why Other Options Are Incorrect: Option B: Credit bank or cash account and debit share capital and/or premium account - This option is incorrect because it reverses the fundamental accounting principle of double-entry bookkeeping. When cash is received, it should be debited (increased), not credited. Crediting the cash account would imply a decrease in cash, which is not the case when shares are issued. Option C: Debit shares account and credit capital account - This option is misleading because it does not specify the correct accounts. The term "shares account" is not standard terminology in accounting. The correct terminology would be "cash" or "bank" for the debit and "share capital" for the credit. Additionally, it does not account for the cash received, which is essential in this transaction. Option D: Credit shares account and debit capital account - Similar to Option C, this option uses non-standard terminology and reverses the correct entries. It suggests that the shares account is being credited, which does not accurately reflect the transaction. The capital account should be credited, not debited, when shares are issued. Summary of Key Points:

• Debit Cash/Bank: When shares are issued, cash or bank deposits increase, so the cash or bank account is debited.
• Credit Share Capital: The share capital account is credited to reflect the increase in equity from the shares issued.
• Share Premium: If shares are issued at a premium, the excess amount is credited to a share premium account.
• Double-Entry Principle: Always remember that every transaction affects at least two accounts, maintaining the balance in the accounting equation (Assets = Liabilities + Equity).

Revision Summary:

• When shares are issued, debit the cash or bank account and credit the share capital account.
• If shares are issued at a premium, also credit the share premium account.
• Ensure to use standard accounting terminology for clarity.
• Remember the double-entry accounting principle to maintain balance in financial records.