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When ordinary shares are issued for cash above par value, which account absorbs the portion of cash received that exceeds total par value?
AA gain on issue of shares
BOrdinary share capital account
CRetained earnings account
DShare premium (excess over par)
Answer & Solution
Correct answer: D. Share premium (excess over par)
1. Share capital can be credited only in multiples of par value per share.
2. The cash received above total par must therefore go elsewhere.
3. It is not income, so it never touches retained earnings or a gain account.
4. The excess is credited to share premium (paid-in capital in excess of par).
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §6.3 "Issuing Stock for Cash", p.247_
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