Juma started a business with sh.1200 in cash.How do we record these items in the appropriate accounts?
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Oct 25, 2023
To record Juma's starting cash of sh.1200 in the appropriate accounts, you would typically follow these steps:
1. Create a Cash account: This account is used to track all cash transactions. It is usually classified as an asset account on the balance sheet.
2. Record the initial cash investment: Debit the Cash account with sh.1200 to increase its balance. This represents the cash Juma invested in the business.
The journal entry would look like this: Debit Cash (Asset) - sh.1200 Credit Owner's Equity (Capital) - sh.1200
By debiting the Cash account, you increase its balance, reflecting the sh.1200 cash investment. The credit to Owner's Equity (Capital) represents Juma's ownership in the business, as the initial investment increases his capital.
Note: The specific account names and classifications may vary depending on the accounting system or framework used. It's always a good idea to consult with an accountant or follow the guidelines of your accounting software.