1. cash a/C. dr. 500000

To capital a/C. 500000
2. capital a/C dr. 500000

To bank loan a/C. 500000

Journal Entry for Starting Business with Bank Loan of 500000

There are two parts to the journal entry - one for receiving the loan and the other for recording the expenses associated with starting the business.

Part 1: Receiving the Loan

When the bank approves the loan, the business owner will receive the funds in their bank account. The journal entry for this will be:

Debit: Bank account (Asset) - 500000
Credit: Loan account (Liability) - 500000

This entry reflects the increase in cash (bank account) and the corresponding increase in debt (loan account).

Part 2: Expenses Associated with Starting the Business

Once the funds are received, the business owner may start incurring expenses related to starting the business. The journal entry to record these expenses will depend on the type of expenses and the accounts impacted. Here are some examples:

Debit: Equipment (Asset) - 150000
Credit: Bank account (Asset) - 150000

This entry reflects the purchase of equipment using the loan funds.

Debit: Rent expense (Expense) - 10000
Credit: Bank account (Asset) - 10000

This entry reflects the payment of rent using the loan funds.

Debit: Salaries expense (Expense) - 50000
Credit: Bank account (Asset) - 50000

This entry reflects the payment of salaries using the loan funds.

Overall, the journal entries will reflect the increase in assets (bank account and equipment) and the corresponding increase in liabilities (loan account) as well as expenses incurred. These entries will ensure that the financial statements accurately reflect the use of loan funds and the impact on the business.