If a promoter pays a lawyer N5,000 for services rendered in preparing a Memorandum of Incorporation, the journal entry is to debit?

  • A preliminary expenses, credit cash accounts
  • B promoter, credit creditors' accounts
  • C lawyer's credit cash accounts
  • D cash , credit incorporation accounts
jamb 1999accounting

The correct answer is A. preliminary expenses, credit cash accounts

This is because the cost of preparing the Memorandum of Incorporation is a preliminary expense, which is a type of expense incurred before a company is formally incorporated.

The cash account is credited to reflect the payment made to the lawyer.

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