Question based on accounting for shares.

Question

In accounting for shares when application money is transferred to share capital a/c why is not share capital a/c debited as money is transferred to it(receiving)?

Answer 1

Important concept is transfer to and from which type of account.

Share capital account has normal credit balance. It is credited to increase it.

Retained earnings has normal credit balance. It is credited to increase it.

When money is transferred from retained earnings account to share capital account, the retained earning decreases (debit) and share capital account increases (credit).