Question 7
Double Entry and the LedgerDiamon Ringo business was started when Mr. Diamon brought in a cheque of ₦500 000, which was paid into the bank account. Which of the following entries properly records the transaction?
- A.Cash account was credited with ₦500 000 and the capital account was debited with ₦500 000
- B.Bank account was debited with ₦500 000 and capital account was credited with ₦500 000
- C.Bank account was credited with ₦500 000 and capital account was debited with ₦500 000
- D.Mr. Diamon's account was debited with ₦500 000 and the cheque account was credited with ₦500 000.
Show the answer and explanation
Answer: B (Bank account was debited with ₦500 000 and capital account was credited with ₦500 000)
Explanation
The bank receives the money, so bank is debited; the owner has given capital to the business, so capital is credited.