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CMA Foundation · Fundamentals of Financial and Cost Accounting · Journal and Ledger

Anita started a business with cash Rs 2,00,000 and furniture worth Rs 50,000. Which compound journal entry records this?

Debit Cash Rs 2,00,000 and Furniture Rs 50,000, and credit Capital Rs 2,50,000. Assets brought in by the proprietor are debited, and the business owes that value to the owner, so Capital is credited with the total.

  1. ACash A/c Dr. 2,00,000 and Furniture A/c Dr. 50,000 to Capital A/c 2,50,000Correct
  2. BCash A/c Dr. 2,00,000 to Capital A/c 2,00,000 only, and Furniture A/c ignored
  3. CCapital A/c Dr. 2,50,000 to Cash A/c 2,00,000 and Furniture A/c 50,000
  4. DCash A/c Dr. 2,50,000 to Capital A/c 2,50,000

Explanation

Both cash and furniture are assets that come into the business, so both are debited. The owner's capital is a liability of the business to the proprietor, so it is credited with the total Rs 2,50,000. Option D wrongly puts the furniture into cash.

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