A proprietor introduces machinery as additional capital. Which entry correctly records the transaction?
Correct answer: A. Debit machinery and credit capital
- A. Debit machinery and credit capital
- B. Debit capital and credit machinery
- C. Debit cash and credit capital
- D. Debit drawings and credit machinery
Explanation
The machinery is an asset received by the business, so machinery is debited. The proprietor's capital increases by the same amount, so capital is credited.
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About Double Entry and Books of Prime Entry
Double entry records every transaction with equal debit and credit entries, based on the accounting equation and the classification of assets, liabilities, capital, income and expenses. Books of prime entry include the sales, purchases, returns and cash books, journal, and source documents used before transactions are posted to ledger accounts.
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