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


t accounts assets and liabilitieslabor variancesdouble entry bookkeeping systemledger card templateoverhead spending variancedouble entry bookkeeping examplesallowance for uncollectible accounts is classified asaged accounts receivableformula of gearing ratiovendor reconciliation processinterest bearing note payableweighted average contribution margin per unit formulaledger book pdfnet profit turnover ratio formulapvifa tablesperforma of income statementbad debt expense equationshareholders equity calculatorbookkeeping definitionstock turnover days calculationtypes of petty cash systemsfixed asset turnover definitionsundry creditors accountpurchase ledger control accountinventory lcmretail shrink definitionsample balance sheet reconciliation templatetvm calculatorsformula for unit contribution marginrecording accounts receivabletimes interest earned calculatorexcel pv calculationdiminishing value depreciation calculatorhow to solve for variable costdiminishing interest calculatorcompany bookkeeping templatesformula to calculate simple interest and compound interestexcel spreadsheet for bookkeepingannuity factor table exceldividend paid journal entrydebtors collection period definitionaccumulated depletionword voucher templateprintable accounting ledgercapital lease vs operating lease accountingdefine cushionscash flow calculator excelhow to write a voucher for paymentperpetual inventory and periodic inventoryreceipts and payments accounts templatean adjusting entry can include aamortization for intangible assetsifrs provision for doubtful debtstreatment of deferred tax in profit and loss accountdupont analysis roedebits increasecontra assets accountroyalties accounting treatmentrevenue projection templateageing of accounts receivablecash conversion cycle diagramhow to calculate amortization expensehow to calculate percentage of completion in excelannual interest rate formula excelaccounts payable for dummiesadjusting journal entry for bad debt expenseinternal controls accounts payablepayroll journal entries exampleswhat kind of account is accumulated depreciationoverhead absorption rate formulaquarterly interest rate formulaaccounts payable spreadsheet templatepurpose of retained earnings statement