Attempt Since the nitrogen site is more nucleophilic it should react first. But still Oxygen can react and hence I believe A should be right. But the book says C. Where did I go wrong? Please help.
Phenol is a pretty good leaving group so phenyl acetate is an acetylating agent and fairly labile in aqueous base. The reaction conditions are not clear enough IMO to say whether you would get a or c, but with a basic work-up the OAc can hydrolyse back to phenol. If the amount of Ac2O is limited then any PhOAc formed will acetylate the aniline giving back PhOH.