Loans & drawings · Level: Basics
Journal entry: Capital introduced at the start
At the start the owner puts money into the business. Bank and Cash rise, and so does Capital.
Worked example
To start the business, the owner pays £28,000.00 into the business bank account and £1,800.00 into the till.
Correct journal entry
Bank £28,000.00, Cash £1,800.00 / Capital £29,800.00
Debit
Bank£28,000.00
Cash£1,800.00
Credit
Capital£29,800.00
Why?
- Bank: asset increases → debit
- Cash: asset increases → debit
- Capital: capital increases → credit
Typical mistake
Booking the money put in as income.
Your turn
Three problems on exactly this case, with different numbers. Amounts work with or without separators, e.g. 2,400.00 or 2400.
Transaction
To start the business, the owner pays £30,000.00 into the business bank account and £1,400.00 into the till.
Debit
Assets up · expenses · liabilities down
Total debit£0.00
Credit
Liabilities up · income · assets down
Total credit£0.00
Frequently asked questions
What is the journal entry for capital introduced at the start?
Example: Bank £28,000.00, Cash £1,800.00 / Capital £29,800.00.
How do I recognise this case?
At the start the owner puts money into the business. Bank and Cash rise, and so does Capital.
What is the typical mistake?
Booking the money put in as income.