28.03.2023 - 16:00

If the owner’s capital account was increased, would this be recorded as a debit or a credit?

If the owner’s capital account was increased, would this be recorded as a debit or a credit?

Answers (1)
  • Dunhil
    April 8, 2023 в 15:37

    If the owner's capital account was increased, it would be recorded as a credit. In accounting, the owner's capital account is a part of the equity section of the balance sheet that represents the owner's investment in the business. Increases in the owner's capital account are recorded as credits because equity accounts have a normal credit balance.

    To better understand this, it's important to know that every transaction in accounting involves at least two accounts, with one account debited and the other credited. When a business owner invests additional money into the business, the owner's capital account is increased. To record this transaction, the owner's capital account would be credited, and the account representing the source of funds (such as cash) would be debited.

    Conversely, if the owner withdraws money from the business, the owner's capital account is decreased, which would be recorded as a debit, and the account representing the destination of funds (such as cash) would be credited.

    In summary, if the owner's capital account is increased, it is recorded as a credit, and if it is decreased, it is recorded as a debit.

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