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CA Foundation · Accounting · Accounts from Incomplete Records

While converting single entry records into double entry, a trader's opening Statement of Affairs shows assets of Rs 5,00,000 and liabilities of Rs 1,80,000. The opening journal entry will show which of the following?

The opening entry debits all assets for Rs 5,00,000, credits liabilities for Rs 1,80,000 and credits Capital Account for the balancing Rs 3,20,000. Capital is the owner's claim, so it has a credit balance and the entry balances.

  1. ACapital A/c debited with Rs 3,20,000 and assets credited
  2. BAssets debited Rs 5,00,000, liabilities credited Rs 1,80,000 and Capital A/c credited Rs 3,20,000Correct
  3. CAssets debited Rs 5,00,000, liabilities credited Rs 1,80,000 and Capital A/c debited Rs 3,20,000
  4. DAssets debited Rs 3,20,000 and Capital A/c credited Rs 3,20,000

Explanation

Opening capital = 5,00,000 - 1,80,000 = Rs 3,20,000. Assets are debited at their full value, liabilities are credited, and capital is credited with the balancing figure so that debits equal credits (5,00,000 = 1,80,000 + 3,20,000). Debiting capital would make the entry unbalanced.

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