Q.The following balances appeared in the books of Vinoth on Jan 1 2018. Assets : Cash ₹ 40,000; Stock ₹ 50,000 ; Amount due from Raj ₹ 50,000 Machinery ₹ 40,000 ; Liabilities : Amount due to Hari ₹ 30,000. Pass opening Journal Entry.

Capital introduced by the proprietor is credited to the Capital account — option (c).

The entry

When the owner brings cash into the business:

Why credit Capital?

• By the business entity concept, the business is separate from its owner; whatever the owner supplies is owed back to him. This claim of the owner on the business is Capital — a liability of the business. …

Money brought in by the proprietor is credited to the Capital account, so the correct answer is option (a).

By the business entity concept, the business is separate from its owner. When the proprietor brings money into the business:

• The business receives cash, so Cash account is debited. …

Paid salary by cheque: Salary A/c is debited and Bank A/c is credited — option (a).

Applying the modern rules of debit and credit:

• Salary A/c is an expense — expenses are debited when incurred, so Salary A/c Dr. ₹3,000.
• Payment is by cheque, so the money leaves the bank, not the cash box. Bank A/c is an asset; an asset that decreases is credited, so To Bank A/c ₹3,000.

Journal entry:

| Particulars | L.F. | Debit (₹) | Credit (₹) |

|---|---|---|---| …