If you are looking to understand how to properly record the Journal Entry for Capital Introduced in your business, you’re in the right place. In this article, we will explain how to make journal entries for capital introduced in simple terms, without needing to consult multiple sources.
JOURNAL ENTRY FOR CAPITAL INTRODUCED
Debit Cash/Bank Account
Credit Capital Account
Let’s break it down in plain language. Capital is the amount invested by the owner in the business, either in the form of cash or assets. When you introduce capital into the business, it’s like putting money into the company’s bank account.
So, we debit the Cash or Bank Account because it’s an inflow of funds. Simultaneously, we credit the Capital Account to show the owner’s equity in the business.
BEST ARTICLE (By Reading below article you become master in passing Journal Entries)
JOURNAL ENTRIES WITH EXAMPLESÂ
EXAMPLE 1: STARTING BUSINESS WITH CASH
Suppose Mr. XYZ starts a company/business with cash of ₹1,00,000:
 Cash Debit ₹1,00,000
 Share Capital Account Credit ₹1,00,000
(Explanation: The company is beginning with a cash injection)
EXAMPLE 2: STARTING BUSINESS WITH CASH, LAND, AND STOCK
Mr. XYZ starts a business with cash of ₹10,000, land worth ₹10,00,000, and stock worth ₹90,000:
Cash Debit ₹10,000
Land Debit ₹10,00,000
Stock Debit ₹90,000
Share Capital Account Credit ₹11,00,000
(Explanation: The company is starting with cash, land, and stock)
 EXAMPLE 3: CAPITAL INTRODUCED BY CHEQUE
Mr. XYZ invests ₹10,00,000 in the company by writing a cheque:
Bank Account Debit ₹10,00,000
Share Capital Account Credit ₹10,00,000
(Explanation: Capital is introduced into the company via a cheque)
ADDITIONAL CAPITAL INTRODUCED JOURNAL ENTRY
If more capital is introduced into the business, you would make a similar journal entry, for example:
 Cash/Bank Account Debit ₹1,00,000
 Share Capital Account Credit ₹1,00,000
(Explanation: Additional capital has been introduced into the business)
JOURNAL ENTRY FOR CAPITAL INTRODUCED CONCLUSION
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