Capital Introduction

When you start your business you need a capital introduction. Suppose for example you start by depositing 1,000 cash into a business bank account.

Journal Entry for the Capital Introduction

The capital introduction transaction is shown in the accounting records with the following bookkeeping entries:

Capital Introduction Journal Entry
Account Debit Credit
Cash 1,000
Capital 1,000
Total 1,000 1,000

Capital Introduction Bookkeeping Entries Explained

Debit – What came into the business
Cash was deposited into the business bank account with the introduction of capital.

Credit – What went out of the business
The 1,000 capital represents your investment in the business and indicates ownership and an entitlement to a share of the profits. The capital introduced, together with retained earnings, forms the owners equity of the business.

The Accounting Equation

The accounting equation, Assets = Liabilities + Capital means that the total assets of the business are always equal to the total liabilities plus the owners equity of the business. This is true at any time and applies to each transaction. For this transaction the accounting equation is shown in the following table.

Capital Introduction Accounting Equation
Assets = Liabilities + Owners Equity
Cash = None + Capital
1,000 = 0 + 1,000

In this case an asset (cash) has been increased by the debit entry, and an equity account (capital) is also increased by the corresponding credit entry.

Popular mdct.ru Examples

Another mdct.ru example for you to discover.

Capital Introduction November 6th, 2016Team

You May Also Like


Related pages


anuity duebookkeeping journal entries examplespayback excelexamples of owner's equity in accountingexcel bank reconciliation templatewhat is amortisation of goodwillgoods sent on consignmentdeclining balance depreciation examplejournal entry for depreciation of equipmenthow to calculate net credit salesdegree of financial leverage calculatorexcel calculate irrconvertible note accounting treatmentdiscounting of debtorsjournal voucherwhat is the normal balance of accounts payablegross margin percentage calculatorjournal entries exercisescapital lease calculatorexample of unearned revenuesimple accounting spreadsheetallowance method of accounting for bad debtssimple accounting spreadsheet excelprofitability index rulecontra in accounting exampledays sales in receivable formulavoucher entry in accountingjob costing formatexcess and obsolete inventorythe accounting equation and the balance sheethow to calculate aging of accounts receivablenon current asset turnover formulaadjusting entries are recordedaccounting equitionunearned revenue tax treatmentoffice supplies adjusting entrydeferred tax in cash flow statementjournal entry for security deposithow to record intangible assets on the balance sheetwhy is prepaid expense an assetassembly line workers wages are period costssalaries earned but not paid journal entryexample of liquidation and distribution accountasset turnover equationcalculating stockholders equityformula of contribution margincumulative redeemable preferred stockexamples of cash disbursementsinventory perpetualperpetuity due formulaa multiple step income statementwhat are accruals and prepaymentsamortisedgp gross profitfuture value of a lump sumdifference between carriage and freightwhat is an example of an accelerated depreciation methodjournal entries for depreciation of fixed assetaccounting credit memo journal entryperpetual periodic inventoryhow to close cash dividends journal entrycost of good sold income statementexcel debt calculatordepreciation in trial balancestages of accounting cycledefine deferred incomewhich of the following accounts belong in the general ledgervalue of perpetuity formulameaning of fob destinationdebit credit accounting cheat sheetunearned revenue journal entriesaccounting ajeformula of contribution margininventory valuation examplesfinding ending inventory using fifo