Started business with cash 50000 entry?
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There are three types of businesses that can be commenced, they are sole proprietorship, partnership, and joint-stock company. As we all know, to start any business a certain sum of money has to be invested by the owner which is known as the capital of the business in terms of accounting.
In companies, commencement is a declaration issued by the company’s directors with the registrar stating that the subscribers of the company have paid the amount agreed. In a sole proprietorship, the business can be commenced with the introduction of any asset such as cash, stock, furniture, etc.
Journal entry
In the journal entry, “Started business with Cash”
As per the golden rules of accounting, the cash a/c is debited because we bring in cash to the business, and as the rule says “debit what comes in, credit what goes out.” Whereas the capital a/c is credited because “debit all expenses and losses, credit all incomes and gains”
As per modern rules of accounting, cash a/c is debited as cash is a current asset, and assets are debited when they increase. Whereas, on the increment on liabilities, they are credited, therefore, capital a/c is credited.
Therefore, the entry we’ll be passing is-