July 1 – Started business with #10,500
July 31- Paid Agromachinex #6,000 owing
them
The double entry for July 1 would be
-
A.
debit capital and credit cash -
B.
credit cash and debit bank -
C.
debit cash and credit capital -
D.
debit purchases and credit cash
Correct Answer: Option D
Explanation
Starting a business with 10500 means the business owner must have bought good for resale with that amount of money. Therefore we will debit purchase/stock account and credit cash account
Note; capital (cash in this case) is the money used in started a business
Purchases in accounting are goods bought for resale.