1. The amount brought into the business by proprietor should be credited to
Answers
Answer:
Capital Account
Explanation:
The owner can bring in capital in three ways: cash in hand, cash at bank and assets like furniture and fixtures.
Cash in hand as well as cash at bank are assets and other things like furniture and fixtures etc. are also assets.
Since assets are being brought in the business; in other words, the amout of assets is increasing, so the asset account is debited.
Capital is the amount which the owner invests into the business and it is a liability for the business because the business would have to returnit to the owner in the form of profits.
Therefore, capital is a liability and it is increasing.
Hence we credit the capital amount.
For example, Mr. A invest Rs. 50,000 cash in hand and Rs. 2,00,000 cash at bank along with furniture costing Rs. 20,000 into his buiness, the journal entry for that would be (refer to the attachment)
