journal entry problem and Solution

Name :: Monica


Your Country :: india

Question Title: :: journal entry problem

Your Country :: india

Explain your question in detail :: 1. ajay commenced business with 70000
out of which rs 50000 were his own and balanced taken loan from mr Vijay rs
20000.

Category :: Education

Answer : 

To record the commencement of business by Ajay with the given details, we need to make the following journal entries:

1. **Ajay Commenced Business with Cash and a Loan:**

   - **Debit** the Cash account to record the total cash invested in the business.

   - **Credit** the Owner's Capital account for Ajay's own investment.

   - **Credit** the Loan account (or the name of the lender) to record the loan taken from Mr. Vijay.

Here are the journal entries for the transaction:

1. **Cash Account** (increases the asset account because cash is received):

   ```

   Debit: Cash A/c      ₹70,000

   ```

2. **Ajay’s Capital Account** (increases the owner's equity as it represents Ajay’s own investment):

   ```

   Credit: Ajay's Capital A/c      ₹50,000

   ```

3. **Loan from Mr. Vijay Account** (increases the liability as it represents the amount owed to Mr. Vijay):

   ```

   Credit: Loan from Mr. Vijay A/c      ₹20,000

   ```

**Journal Entry:**

| Date | Account Title              | Debit (₹) | Credit (₹) |

|------|----------------------------|-----------|------------|

|      | Cash A/c                    | 70,000    |            |

|      |      To Ajay's Capital A/c  |           | 50,000     |

|      |      To Loan from Mr. Vijay A/c |      | 20,000     |

**Explanation:**

- The **Cash A/c** is debited because the business receives a total of ₹70,000 in cash.

- The **Ajay’s Capital A/c** is credited with ₹50,000 to reflect Ajay’s personal investment in the business.

- The **Loan from Mr. Vijay A/c** is credited with ₹20,000 to show the liability incurred due to the loan from Mr. Vijay.

This entry effectively captures the financial position of the business at the commencement, showing both the capital introduced by the owner and the loan obtained.

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