Cash a/c Dr. 1,50,000
To capital a/c cr. 1,50,000

( Being business started with cash )


Purchased a/c Dr. 40,000
To machinery a/c cr. 40,000

( Being purchased machinery on credit )

**Rohit's Business Transactions**

Rohit, a new business owner, has recently commenced his business venture. He has made a couple of transactions, including starting the business with cash and purchasing machinery on credit. Let's discuss these transactions in detail.

**Transaction 1: Commenced Business with Cash**

In the first transaction, Rohit has invested his own funds into the business. He has started the business by contributing cash worth Rs. 1,50,000. This initial capital will serve as the foundation for his business operations and will be recorded as an asset in the company's books.

**Transaction 2: Purchased Machinery on Credit**

In the second transaction, Rohit has acquired machinery for his business operations. However, instead of making an immediate payment, he has decided to purchase the machinery on credit. The machinery is worth Rs. 40,000, and the supplier or vendor has agreed to provide credit terms to Rohit.

Purchasing machinery on credit means that Rohit will receive the machinery now but will pay for it at a later date, as per the agreed credit terms. This allows Rohit to acquire essential assets for his business without immediately depleting his cash reserves.

The transaction will be recorded in the books of accounts as follows:

1. Increase in Machinery: The machinery acquired will be recorded as an asset in the business's books. It will be added to the "Machinery" account, increasing its value by Rs. 40,000.

2. Increase in Accounts Payable: As Rohit has purchased the machinery on credit, a liability called "Accounts Payable" will be created. This liability represents the amount owed to the supplier/vendor for the machinery. The "Accounts Payable" account will be increased by Rs. 40,000.

Once the payment is made to the supplier/vendor within the agreed credit period, the liability will be reduced, and the cash account will be decreased by the same amount.

It is important for Rohit to keep track of his credit purchases and make timely payments to maintain a good relationship with his suppliers/vendors and avoid any penalties or additional charges for late payments.

Overall, these transactions mark the beginning of Rohit's business journey, with his initial investment of cash and the acquisition of machinery on credit. Managing finances effectively and keeping accurate records of such transactions will be crucial for the success and growth of his business.