Loans & drawings · Level: Basics
Journal entry: Money put in by the owner
Private money is paid into the business. Capital rises; Drawings is credited.
Worked example
£20,000.00 of private money is paid into the business bank account.
Correct journal entry
Bank £20,000.00 / Drawings £20,000.00
Debit
Bank£20,000.00
Credit
Drawings£20,000.00
Why?
- Bank: asset increases → debit
- Drawings: money put in increases capital → credit
Typical mistake
Booking the money as a loan.
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
£1,000.00 of private money is paid into the business bank account.
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 money put in by the owner?
Example: Bank £20,000.00 / Drawings £20,000.00.
How do I recognise this case?
Private money is paid into the business. Capital rises; Drawings is credited.
What is the typical mistake?
Booking the money as a loan.