When a share is sold for less than its nominal value, the difference is debited to
Question 1 Report
When a share is sold for less than its nominal value, the difference is debited to
Answer Details
When a share is sold for less than its nominal value, the difference is debited to the share discount account. A company may offer shares at a discounted price to attract investors or to raise capital quickly. When this happens, the difference between the nominal value of the share and the discounted price is called the discount. This discount is debited to the share discount account, which is a contra-equity account. The share discount account reduces the total value of the company's equity. It is important to note that the share discount account is different from the share premium account, which is used to record the excess price paid for shares sold above their nominal value.
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