What is the journal entry for recording a sole trader's capital contribution?

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Question: What is the journal entry for recording a sole trader\'s capital contribution?

Options:

Correct Answer: Debit Cash, Credit Capital Account

Solution:

The correct entry is to debit Cash and credit the Capital Account to reflect the increase in cash from the owner\'s contribution.

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?

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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