July 1 - Started business with #10,500

July 31- Paid Agromachinex #6,000 owing

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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
jamb 2013accounting

The correct answer is D. debit purchases and credit cash

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.

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