Commencing Entries

• 1. Establishing a new business-cash receipts journal is used to record contributed cash because it is a reciept-non-cash assets – recorded in general journal

• 2. Switching from single to DOUBLE ENTRY-only general journal is used, as the cash at bank is not a receipt, just a balance at a point in time

Contribution of an asset by owner

- Cash – cash receipts journal- Non cash assets – general journal

DR Asset CR Capital

Withdrawal of asset by owner

• Cash – cash payments journal• Non cash asset – General Journal

DR Drawings CR Asset

AGREED VALUE

• If owner purchases – evidence would be provided by source document (invoice/cheque butt – HISTORICAL COST ACCOUNTING)

If no source document available to verify and owner is contributing a 2nd hand item, an estimate of its value is made in an attempt to be relevant. – AGREED VALUE of an asset! - RELEVANCE