What is the journal entry for recording a sole trader's capital introduced into the business?

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Q: What is the journal entry for recording a sole trader's capital introduced into the business?

Solution: The correct entry is to debit Cash (increasing assets) and credit Capital Account (increasing owner's equity).

Steps: 6

Step 1: Identify the amount of capital the sole trader is introducing into the business.
Step 2: Understand that introducing capital means the business is receiving cash, which is an asset.
Step 3: Record the cash received by debiting the Cash account. This means you will increase the Cash account.
Step 4: Recognize that the capital introduced increases the owner's equity in the business.
Step 5: Record the increase in owner's equity by crediting the Capital Account. This means you will increase the Capital account.
Step 6: Write the journal entry: Debit Cash and Credit Capital Account for the same amount.