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[PRiYO]

Ranjit paten opened a business in january 1, 2008 on that date he desposit $5000 on the account. and during november the following transaction hapend.

Credit purchese of goods $1500
Sales $2000
Drawing $500
Paid suplier $1750

Whats the balance of his account end of the month ?

[Acid]

Hi PriYo,

The answer to your question is : $4500 ( $5000 - $500 ) .

Remember in Capital a/c we only include the transactions made by the owner.

Best regards ,

Acid

[Annie Lee]

Hi Acid,

Don't mind, can you explain it in more detail? I'm still a bit confuse. Thnx u in advance;)

[Acid]

Hi Acid,

Don't mind, can you explain it in more detail? I'm still a bit confuse. Thnx u in advance;)

Hi Annie,

Captial a/c is usuallly a fixed account. It only records the investment into/out of the business by the owner. This will help the owner to keep track of the investment he did and the money he took out during hte course of the business ( Drawings ).

So in the above question , we only took the money the owner took out of the business to get $4500.

Does that helps ?

[Annie Lee]

I see.

Acid, you are really helpful. Thnx so much!

[PRiYO]

Hi Annie,

Captial a/c is usuallly a fixed account. It only records the investment into/out of the business by the owner. This will help the owner to keep track of the investment he did and the money he took out during hte course of the business ( Drawings ).

So in the above question , we only took the money the owner took out of the business to get $4500.

Does that helps ?

You Know why i Put this question .. In BPP exam bank i found it ..


They said the answer is :

$ $
Cash at Bank 5000
Add Sales 2000
...........................
Total 7000 ( Debit )

Less Drawing 500
Less Suplier 1750
-----------------------
Balance C/F 4750 ( Debit )


Now i m confused about this answer !!!!

Acid what do you think ??

According to me it should be 4750 credit. Unless I m not wrong on concept.

[Acid]

Th answer is correct . THe question was unclear asto which balance does it want. So I gave the Capital a/c balance while your solution gives the total cash balance after all these transactions.

Acid

[Annie Lee]

Ya, for what i understand from PriYo's question, i think the answer should $4750 (debit), right?

[PRiYO]

Ya, for what i understand from PriYo's question, i think the answer should $4750 (debit), right?

Yes Right But I was confused first thanks acid Man ....:D

[kiwi]

Hi Acid,PRiYO and Annie

Why two debits? why sales of 2000 & 5000bank is a debit as well.....really dont understand.I would say credit 4750.......
Anyone for help???

:unsure:

[Grace]

This is because the question is about the cash balance and not about the capital.

Now the exaplanation to teh answer is that

when you deposited the cash of $5000 you have debit balance in your entity when sales are made, your cash balance will increase and therefore it is debited (i think you are confused since you are thinking taht the sales has credit balance. this is true but here we are considering the cash generated from cash and therefore debit).

I think rest you understood