Forums › FIA Forums › FA1 Recording Financial Transactions Forums › Duality of Transactions and double entry system
- This topic has 8 replies, 7 voices, and was last updated 9 years ago by Ken Garrett.
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- July 6, 2015 at 2:38 pm #259636
Please explain
July 6, 2015 at 3:32 pm #259639It’s explained in the FA1 notes. Download free FA1 course notes form here:
July 9, 2015 at 9:40 am #260282Capital is a liability of the business By owner’s of the business. What does it mean???
please explain.July 9, 2015 at 12:17 pm #260291Initially,businesses raise money in two ways
1 Their owners pay in capital
2 They borrow from banks or suppliers.Obviously the borrowings are a liability of the business that will have to be paid back at some point. However, strictly owners’ capital is also a liability that the business owes back to the owners. It would be paid back to the owners were the business to come to an end.
Subsequently, if the business makes a profit, those profits are also owed the owners. They can leave the profits in the business, adding to their capital or have the profits paid out either by drawings (an unincorporated business) or by dividends (a company).
August 31, 2015 at 1:21 am #269194Whatever i under stood from this topic is that we did sale 10000 and discount allowed 2000 to the mr A on credit .then the entry will be ..Mr. A debit , discount allowed debit and sales credit .
This is the double entry system .
If i am not correct plz correct meOctober 10, 2015 at 1:05 pm #275755Sale 10000 on credit
The dual entry may beSale cr 10000
Receivable db 10000October 17, 2015 at 3:15 am #276746Dr Mr A 8,000
Dr Discount Allowed 2,000
Cr Sales 10,000November 12, 2015 at 7:53 pm #282043guide me plz
x starts business with 50000 cash,buying inventory 10000 from cash and paying business expenses of 10000 .inventory is purchased on credit for 5000. following these transactions, what is the capital of x’s business?November 14, 2015 at 11:46 am #282303The purchase of inventory for cash just swaps one asset (cash) for another (inventory) so does not alter capital.
The purchase of inventory on credits increases one asset er (inventory) and also increases a liability (payable) so there is not net effect and this does not alter capital.
Paying business expenses of 10,000 reduces teh asset of cash (an increases the expense of a business). Expenses reduce capital because that that value has gone, never to be seen again.
THerefore capital = 50,000 – 10,000 = 40,000.
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