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Mr. Decker invested $20,000 in cash in his new business. How does the company record the investment?

(A) credit Cash and debit Owner's Equity
(B) credit Cash and debit Retained Earnings
(C) credit Cash and debit Investments
(D) debit Cash and credit Owner's Equity
(E) debit Cash and credit Retained Earnings

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phamdiep1810

Answer:

The company records the investment by the entry:

(D) debit Cash and credit Owner's Equity

Explanation:

Mr. Decker invested $20,000 in cash in his new business. He is the Owner of the company.

In the case, the company that he invested received cash from Mr. Decker.

The company will record the increasing in cash and increasing in Owner's Equity account by the journal entry:

Debit Cash $20,000

Credit Owner's Equity $20,000

Tundexi

The Correct answer is D. The company will record the investment by debiting Cash and Crediting Owner's Equity of $20,000 each

Given Information

Mr. Decker invested $20,000 in cash in his new business.

  • It is deduced that he is the Owner of the company but the Owner are treated separately from its business in accounting.

  • Now, the company as an entity received invested cash from Mr. Decker.

Therefore, the company will record increase in cash and Owner's Equity account in Journal.

  • Cash - $20,000 (Debit)
  • Owner's Equity - $20,000 (Credit)

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