Commencement of business with stock of goods:
Illustration 1.
Chiranjeevi commenced business with stock of Rs.5,000. Pass the journal entry.
Note: This transaction means that the proprietor has brought his private stock of goods (i.e., the stock of goods which he had in his house) into the business. So, the two accounts involved in this transaction are (a) stock account and (b) capital account. Stock account is a real account. When the private stock of goods is brought into the business by the proprietor, stock of goods comes into the business. So, stock account has to be debited.
Capital Account is a personal account. When the proprietor brings his private stock of goods into business, he is the giver of benefit to the business. So, capital account has to be credited.
The journal entry for this transaction will be:
Illustration 1.
Chiranjeevi commenced business with stock of Rs.5,000. Pass the journal entry.
Note: This transaction means that the proprietor has brought his private stock of goods (i.e., the stock of goods which he had in his house) into the business. So, the two accounts involved in this transaction are (a) stock account and (b) capital account. Stock account is a real account. When the private stock of goods is brought into the business by the proprietor, stock of goods comes into the business. So, stock account has to be debited.
Capital Account is a personal account. When the proprietor brings his private stock of goods into business, he is the giver of benefit to the business. So, capital account has to be credited.
The journal entry for this transaction will be:
Journal Entry
Date. Particulars. L.F. Dr. CR.
Rs. Rs.
Stock Account. Dr. 5,000.
To Capital Account. 5,000
(Being the stock of
goods brought into
the business by the
proprietor)
proprietor)
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