Transaction Entry for a Firm's Capital

📌 CONCEPT: The initial capital and subsequent investments of a firm are recorded as an increase in its capital, while withdrawals are recorded as a decrease in capital.

📐 RULE / FORMULA: The initial capital is recorded on the credit side of the capital account, and subsequent investments are recorded on the debit side. Withdrawals are recorded on the debit side.

💡 WORKED EXAMPLE: Let's consider the given transactions. ABC Ltd.'s initial capital is ₹50,000. The owner invests an additional ₹25,000 and withdraws ₹10,000. - Debit Capital A/c ₹25,000 (additional investment) - Credit Capital A/c ₹10,000 (withdrawal) - No entry is required for the initial capital as it is already recorded in the Capital A/c.

⚠️ COMMON MISTAKE: Students usually forget to record the initial capital or make errors in calculating the subsequent investments and withdrawals.