Diamond Ringo business was started when Mr. Diamond brought in a cheque of ₦500,000, which was paid into the bank account. Which of the following entries pr...

Diamond Ringo business was started when Mr. Diamond brought in a cheque of ₦500,000, which was paid into the bank account. Which of the following entries properly records the transaction?

Answer Details

The correct entry that properly records the transaction is: Bank account was debited with ₦500,000 and capital account was credited with ₦500,000. This is because Mr. Diamond brought in a cheque of ₦500,000, which was paid into the bank account. Therefore, the bank account should be debited with the ₦500,000 to reflect the inflow of cash into the account. The capital account should be credited with the ₦500,000 to record the increase in the owner's equity in the business resulting from the contribution of capital by the owner. is incorrect because it credits the cash account instead of the capital account, which would result in an incorrect balance in the capital account. is incorrect because it only records the inflow of cash into the bank account and does not reflect the increase in the owner's equity resulting from the contribution of capital. is incorrect because it debits Mr. Diamond's account, which is unnecessary since the transaction is between Mr. Diamond and his business, and does not involve any other parties.