An owner invests $1000 in the company. This transaction impacted the checking account and the owner's equity account. In your journal entry, which account do you credit?

An owner invests $1000 in the company. This transaction impacted the checking account and the owner's equity account. In your journal entry, which account do you credit?

• A. Owner's equity account
• B. Checking account
• C. Cash account
• D. Capital contributions

Answer: (A)

When the owner puts cash into the business, the company’s assets rise and the owner’s stake in the business also rises. In double-entry bookkeeping, increases to assets are recorded with a debit, while increases to owner’s equity are recorded with a credit. So the transaction is recorded by debiting the cash/checking account for the cash received and crediting an owner’s equity account to reflect the increased ownership interest. That owner’s equity account is often labeled Capital Contributions, which is a form of equity. The other options don’t fit because they would either be debited to increase assets or aren’t the appropriate equity account representing the owner’s investment.

When the owner puts cash into the business, the company’s assets rise and the owner’s stake in the business also rises. In double-entry bookkeeping, increases to assets are recorded with a debit, while increases to owner’s equity are recorded with a credit. So the transaction is recorded by debiting the cash/checking account for the cash received and crediting an owner’s equity account to reflect the increased ownership interest. That owner’s equity account is often labeled Capital Contributions, which is a form of equity. The other options don’t fit because they would either be debited to increase assets or aren’t the appropriate equity account representing the owner’s investment.