Received Cash From Owner As An Investment Journal Entry

Owner Started Business With Cash Journal Entry

When the sole owner of the business started the Sole Proprietorship Business, then, he invested either cash or goods into the business called Capital. Such initial investment made by the owner is received by the business as a right of the owner of the business against the assets of the business is called Owner’s Equity.

Initial Investment Journal Entry / Invested Cash Journal Entry

For example, Mr. A, as a sole proprietor, made an initial investment of Rs. 50000 into his business. Then the journal entry to record is shown below:

                                                                     Cash a/c  50000

 

                                                                                          Capital a/c  50000

 

                                     (Mr. A Started Business With An Initial Investment Of Rs. 50000)

 

The Effect Of Received Cash From Owner As An Investment On The Accounting Equation 

The effect of this transaction on accounting equation is shown below:

                                   Assets =   Liabilities +    Owner’s Equity

                                     +Cash    =           0          +         (+Capital)

                                       50000  =           0          +             50000

 

Cash account is a current asset and it is added to the asset side of the Accounting Equation by Rs. 50000 as it is increasing while capital account, as a part of owner’equity, is also increasing by Rs. 50000, so it is also added to owner’equity on the right side of the accounting equation.