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What is the journal entry for recording a sole trader's capital contribution?
What is the journal entry for recording a sole trader's capital contribution?
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Practice Questions
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Q1
What is the journal entry for recording a sole trader's capital contribution?
Debit Capital Account, Credit Cash
Debit Cash, Credit Capital Account
Debit Cash, Credit Revenue
Debit Revenue, Credit Cash
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The correct entry is to debit Cash and credit the Capital Account to reflect the increase in cash from the owner's contribution.
Questions & Step-by-step Solutions
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Q
Q: What is the journal entry for recording a sole trader's capital contribution?
Solution:
The correct entry is to debit Cash and credit the Capital Account to reflect the increase in cash from the owner's contribution.
Steps: 5
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Step 1: Identify the owner's contribution. This is the amount of money the sole trader is putting into the business.
Step 2: Determine the accounts involved. You will use the Cash account and the Capital Account.
Step 3: Record the increase in cash. Since cash is coming into the business, you will debit the Cash account.
Step 4: Record the increase in owner's equity. Since the owner is contributing capital, you will credit the Capital Account.
Step 5: Write the journal entry. It will look like this: Debit Cash (for the amount) and Credit Capital Account (for the same amount).
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