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The amount brought into the business by the proprietor should be credited to
- a)Cash account
- b)Capital account
- c)Drawings account
- d)Suspense account
Correct answer is option 'B'. Can you explain this answer?
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Most Upvoted Answer
The amount brought into the business by the proprietor should be credi...
The proprietor contributes capital to the business at the time of its commencement and also at any later stage. Capital is the amount invested by the proprietor in the business. When the proprietor brings in the capital, it is recorded in the books of accounts by making the following journal entry:
Capital A/c Dr.
To Cash A/c
Explanation:
• The capital account is debited because the proprietor brings in capital to the business.
• The cash account is credited because cash is received from the proprietor.
Therefore, the amount brought into the business by the proprietor should be credited to the capital account. This will increase the proprietor's capital in the business.
Option 'A' is incorrect because the cash account is debited when cash is received, not credited.
Option 'C' is incorrect because the drawings account is used to record withdrawals made by the proprietor from the business, not contributions made by the proprietor.
Option 'D' is incorrect because the suspense account is used to temporarily record transactions when there is uncertainty about which account to debit or credit. It is not used to record capital contributions.
Hence, option 'B' is the correct answer.
Capital A/c Dr.
To Cash A/c
Explanation:
• The capital account is debited because the proprietor brings in capital to the business.
• The cash account is credited because cash is received from the proprietor.
Therefore, the amount brought into the business by the proprietor should be credited to the capital account. This will increase the proprietor's capital in the business.
Option 'A' is incorrect because the cash account is debited when cash is received, not credited.
Option 'C' is incorrect because the drawings account is used to record withdrawals made by the proprietor from the business, not contributions made by the proprietor.
Option 'D' is incorrect because the suspense account is used to temporarily record transactions when there is uncertainty about which account to debit or credit. It is not used to record capital contributions.
Hence, option 'B' is the correct answer.
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Community Answer
The amount brought into the business by the proprietor should be credi...
Separate entity concept defines that the business and its owner are treated two separate legal entities. Owner is considered as a creditor in the books of accounts of business. Amount contributed by the owner is a liability, and it is to be credited to capital account.
The accounting entry will be as under:
Cash A/c Dr.
To Capital A/c
hope it will help you
The accounting entry will be as under:
Cash A/c Dr.
To Capital A/c
hope it will help you
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The amount brought into the business by the proprietor should be credited toa)Cash accountb)Capital accountc)Drawings accountd)Suspense accountCorrect answer is option 'B'. Can you explain this answer?
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