{"id":211108,"date":"2025-05-03T07:14:11","date_gmt":"2025-05-03T07:14:11","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=211108"},"modified":"2025-05-03T09:04:52","modified_gmt":"2025-05-03T09:04:52","slug":"aspirations-ltd-began-its-business-operations-as-a-wholesale-supplier-of-office-equipment-on-january-1-2021-2","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/05\/03\/aspirations-ltd-began-its-business-operations-as-a-wholesale-supplier-of-office-equipment-on-january-1-2021-2\/","title":{"rendered":"Aspirations Ltd began its business operations as a wholesale supplier of office equipment on January 1, 2021"},"content":{"rendered":"\n

Aspirations Ltd began its business operations as a wholesale supplier of office equipment on January 1, 2021. To finance its operations, the company issued 1,500,000 ordinary shares at a par value of GH\u00a21 each, receiving full payment in cash at the time of issuance.<\/p>\n\n\n\n

The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n

Correct Answer:<\/strong><\/p>\n\n\n\n

Aspirations Ltd should record the issuance of shares as follows:<\/p>\n\n\n\n

Journal Entry on January 1, 2021:<\/strong><\/p>\n\n\n\n

Dr. Bank                                      GH\u00a21,500,000  \n   Cr. Ordinary Share Capital                 GH\u00a21,500,000\n<\/code><\/pre>\n\n\n\n
\n\n\n\n
300-Word Explanation:<\/strong><\/p>\n\n\n\n
When a company issues ordinary (common) shares, it is essentially raising equity capital from investors. In this scenario, Aspirations Ltd issued 1,500,000 ordinary shares<\/strong> at a par value of GH\u00a21<\/strong> each, and received full payment in cash<\/strong>. This indicates that the shares were issued at par value (no premium), and investors paid the exact value of the shares.<\/p>\n\n\n\n
The par value<\/strong> is a nominal value assigned to each share and is typically the minimum price at which shares can be issued. It is primarily used for accounting purposes and does not necessarily reflect the market value of the shares. Since the shares were issued at par value (GH\u00a21), the total capital raised equals:<\/p>\n\n\n\n
1,500,000 shares \u00d7 GH\u00a21 = GH\u00a21,500,000<\/strong><\/p>\n\n\n\n
In accounting, this transaction increases the company\u2019s cash (an asset) and increases shareholders\u2019 equity (specifically, the ordinary share capital<\/strong> account). The journal entry debits the Bank<\/strong> account (asset) to show the inflow of cash and credits the Ordinary Share Capital<\/strong> account (equity) to reflect the increase in ownership interest in the company.<\/p>\n\n\n\n
This entry is made on January 1, 2021<\/strong>, the date business operations and the issuance took place.<\/p>\n\n\n\n
There is no share premium<\/strong> in this transaction, so no entry is made in a share premium account<\/strong>. If the shares had been issued for more than the par value, the excess would have been credited to a Share Premium<\/strong> or Additional Paid-in Capital<\/strong> account.<\/p>\n\n\n\n
In conclusion, this transaction reflects a fundamental financing activity, where Aspirations Ltd obtains the necessary startup capital through equity financing by issuing ordinary shares to shareholders, laying the foundation for its future operations and growth.<\/p>\n","protected":false},"excerpt":{"rendered":"
Aspirations Ltd began its business operations as a wholesale supplier of office equipment on January 1, 2021. To finance its operations, the company issued 1,500,000 ordinary shares at a par value of GH\u00a21 each, receiving full payment in cash at the time of issuance. The Correct Answer and Explanation is: Correct Answer: Aspirations Ltd should […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-211108","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/211108","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=211108"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/211108\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=211108"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=211108"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=211108"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}