Answer: The journal entry to record the commencement of business with cash is as follows:
Date: [Date of commencement]
Cash Account Debit: Rs 50,000
Bank Account Credit: Rs 25,000
Capital Account Credit: Rs 25,000
Step-by-step explanation:
The Cash Account is debited with Rs 50,000 as the business received cash of that amount.
The Bank Account is credited with Rs 25,000 as a portion of the cash received (Rs 25,000) was deposited into the bank.
The Capital Account is credited with Rs 25,000 as the remaining cash (Rs 25,000) was introduced as capital by the owner into the business.
The journal entry ensures that the accounting equation (Assets = Liabilities + Equity) remains in balance.
The total assets (Cash + Bank) increase by Rs 50,000, which is balanced by an increase in owner's equity (Capital) by Rs 25,000 and an increase in liabilities (Bank) by Rs 25,000.