Started business with cash 50,000, machinery 70,000, and building 1,00,000 Related: Question Paper 2016 (Set 1)?

Question

Started business with cash 50,000, machinery 70,000, and building 1,00,000 Related:  Question Paper 2016 (Set 1)?

Answer

Introduction
Starting a business involves various investments in terms of cash, machinery, and building. In this question, we will discuss how a business started with cash, machinery, and building worth 50,000, 70,000, and 1,00,000 respectively.

Investments Made
The following are the investments made to start the business:

Cash investment of 50,000

Machinery investment of 70,000

Building investment of 1,00,000

Importance of Investments
The investments made in cash, machinery, and building are crucial for the success of the business. Here are some reasons why:

Cash investment provides the necessary liquidity to finance day-to-day operations of the business.

Machinery investment enables the business to produce goods or services efficiently and effectively.

Building investment provides a physical space for the business to operate and store its inventory and equipment.

Impact on Financial Statements
The investments made in cash, machinery, and building will have an impact on the business's financial statements. Here are some examples:

The cash investment will increase the cash balance on the balance sheet.

The machinery investment will increase the value of the fixed assets on the balance sheet.

The building investment will increase the value of the property, plant, and equipment on the balance sheet.

Conclusion
Starting a business involves various investments in cash, machinery, and building. These investments are crucial for the success of the business and have an impact on the financial statements. Understanding the importance of these investments is essential for any entrepreneur looking to start a business.

Answer

Cash a/c Dr. 50000
Machinery a/c Dr.70000
Building a/c Dr. 100000
To Capital a/c.220000
( Being started business with Cash )

Answer

Cash a/c dr.
machinery a/c dr.
building a/c dr.
To capital a/c

Answer

We understand this transaction as - owner has provided cash, machinery and building to the business. As per the separate entity principle of accounting we consider owner and business as two separate entities.

Here cash, machinery and building are real accounts treated as assets of business whereas capital account is a personal account showing owner's contribution in the business.

As per the rules of accounting we debit - cash,machinery and building with their respective amounts and credit - capital account with total contributed amount.

*capital account shows total contribution of the owner so its amount will be Rs. 220000/-

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