Question

The amount brought in by the proprietor in the business should be credited to _____________.

• A. Cash A/c
• B. Capital A/c
• C. Drawing A/c
• D. Bank A/c

Answer 1

Answer: (B)

Capital A/c

Separate entity concept defines that the business and its owner are treated two separate legal entities. Owner is considered as a creditor in the books of accounts of business. Amount contributed by the owner is a liability, and it is to be credited to capital account.

The accounting entry will be as under:

Cash A/c Dr.

To Capital A/c