July 1 – Started business with #10,500
July 31- Paid Agromachinex #6,000 owing
them
The double entry for July 1 would be
- debit capital and credit cash
- credit cash and debit bank
- debit cash and credit capital
-
debit purchases and credit cash
The correct answer is: D
Explanation
Starting a business with 10500 means the business owner must have bought good for resale with that amount of money. Therefore we will debit purchase/stock account and credit cash account
Note; capital (cash in this case) is the money used in started a business
Purchases in accounting are goods bought for resale.