Quick Reference Guide - Capital Investment in Cash by the Partners

Now let's come to discuss on the affected Ledger Accounts/Books of Account and Accounting Reports/Statements for Capital Investment in Cash by the Partners of a Partnership Firm.

Affected Ledger Accounts :

• Cash A/c - Debit

• Partner's Capital A/c - Credit

Journal Entry :

 

In this post let's consider for a three person Partnership Firm.

1st Partner, 2nd Partner and 3rd Partner decided to start a business with Capital investment equally by Cash.

Affected Ledger Accounts : 

• Cash A/c - Debit

• Capital(Partner-1) A/c - Credit

• Capital(Partner-2) A/c - Credit

• Capital(Partner-3) A/c - Credit

Journal Entry for the above three person Partnership Business is :

 

Here, the Debit amount of Cash A/c should be equal to the total of Investment amount by Partner-1, Partner-2 and Partner-3.

For an example, if the Investment amounts are by

Partner-1 ₹50000/-

Partner-2 ₹50000/- and 

Partner-3 ₹50000/- 

In Journal Entry

Cash A/c - Debit = ₹150000/-(i.e Partner-1 ₹50000 + Partner-2 ₹50000 + Partner-3 ₹50000)

Capital(Partner-1) A/c - Credit = ₹50000/-

Capital(Partner-2) A/c - Credit = ₹50000/-

Capital(Partner-3) A/c - Credit = ₹50000/-   

Ledger Posting :

• Cash A/c - Debit column.

• Capital(Partner-1) A/c - Credit column.

Capital Investment amount of of Partner-1 should be posted in Credit amount column for the above Ledger Account of 'Capital(Partner-1) A/c'.

• Capital(Partner-2) A/c - Credit column.

Capital Investment amount of of Partner-2 should be posted in Credit amount column for the above Ledger Account of 'Capital(Partner-2) A/c'.

• Capital(Partner-3) A/c - Credit column.

Capital Investment amount of of Partner-3 should be posted in Credit amount column for the above Ledger Account of 'Capital(Partner-3) A/c'. 

Trial Balance :

• Cash A/c - Debit column of Trial Balance. 

  Debit column of Trial Balance(Cash A/c) will be increased by the total investment amount by three Partners.
  

• Capital(Partner-1) A/c - Credit column of Trial Balance.

  Credit column of Trial Balance of Capital(Partner-1) A/c will be increased by the investment amount. 

• Capital(Partner-2) A/c - Credit column of Trial Balance.

  Credit column of Trial Balance of Capital(Partner-2) A/c will be increased by the investment amount.

• Capital(Partner-3) A/c - Credit column of Trial Balance.

  Credit column of Trial Balance of Capital(Partner-3) A/c will be increased by the investment amount.

Profit & Loss Account :

• No effect on Profit & Loss Account. 

Balance Sheet :

Cash A/c - under Current Assets in Assets side of Balance Sheet. 

Cash A/c under Current Assets will be increased by the transaction amount.

Partner's Capital A/c - under Capital Account in Liabilities side of Balance Sheet.

Partner's Capital A/c under Capital Account will be increased by the transaction amount.

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