Can you create a new company?
Suppose XYZ Ltd. is being formed. Mr. A and Mr. B are the promoters who have agreed to invest Rs. 5 lakhs each in the company. Mr. C is a shareholder who has invested Rs. 1 lakh in the company. However, Mr. D is not related to the company or its promoters and has gifted Rs. 50,000 to Mr. E, a friend, for his personal use. Mr. F has lent Rs. 20,000 to Mr. G, a friend, to buy a car. Can you record these transactions in the company's books of account?
1 Answer
📌 CONCEPT: Recording of transactions involves the process of identifying, analyzing, and documenting business transactions in a company's books of account.
📐 RULE / FORMULA: The accounting equation (Assets = Capital + Liabilities) is a fundamental principle in recording transactions.
💡 WORKED EXAMPLE: Suppose Mr. A invests Rs. 5 lakhs in XYZ Ltd. The transaction would be recorded as follows:
- Dr. Capital (5,00,000) - Cr. Mr. A's Capital A/c (5,00,000)
⚠️ COMMON MISTAKE: Students often forget to record the transaction in the correct account, i.e., either Capital or Mr. A's Capital A/c, or both.
12 Sept 26
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