Final answer:
Joshua Scott's $40,000 investment into his business would be recorded as a debit to the Cash/Bank Account and a credit to Owner's Equity/Owner's Capital, reflecting an increase in both assets and owner's equity on the balance sheet.
Step-by-step explanation:
When Joshua Scott invests $40,000 into his new business, the transaction would be recorded in the journal with two entries, reflecting the dual aspect of accounting. It involves a debit and a credit to represent the resources received by the business and the claim on those resources respectively.
Journal Entry:
- Debit: Cash/Bank Account $40,000 (To record the investment made by Joshua into the business's cash or bank balance.)
- Credit: Owner's Equity/Owner's Capital $40,000 (To record the owner's claim on the business assets representing his investment.)
This entry affects the balance sheet by increasing both the assets (Cash/Bank) and owner's equity (Owner's Capital) by the amount of the investment, $40,000.