To record the commencement of business, we need to identify the assets brought into the business and the corresponding capital introduced by the owner.
This economics question tests your understanding of economic models and analysis. The step-by-step answer below applies the relevant framework and explains the reasoning.
ScanSolve AI Answer
To record the commencement of business, we need to identify the assets brought into the business and the corresponding capital introduced by the owner.
Cash is an asset, and it is increasing, so it will be debited.
Goods (Inventory) is an asset, and it is increasing, so it will be debited.
Capital represents the owner's investment, and it is increasing, so it will be credited.
Step 1: Identify the accounts and amounts.
Cash: ₹ 15,000
Goods: ₹ 500
Capital: ₹ 15,000 + ₹ 500 = ₹ 15,500
Step 2: Prepare the journal entry.
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
| :-------- | :------------------ | :--- | :-------- | :--------- |
| January 1 | Cash A/c Dr. | | 15,000 | |
| | Goods A/c Dr. | | 500 | |
| | To Capital A/c | | | 15,500 |
| | (Being business commenced with cash and goods) | | | |
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The journal entry is:
$$\begin{array}{|l|l|r|r|} \hline \textbf{Date} & \textbf{Particulars} & \textbf{Debit (₹)} & \textbf{Credit (₹)} \\ \hline \text{January 1} & \text{Cash A/c Dr.} & 15,000 & \\ & \text{Goods A/c Dr.} & 500 & \\ & \quad \text{To Capital A/c} & & 15,500 \\ & \text{(Being business commenced with cash and goods)} & & \\ \hline \end{array}$$
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