Alex invested \$30,000 in cash in his business. How will this transaction be recorded in the ledger accounts?

• A. Debit Revenue \$30,000; Credit Cash \$30,000
• B. Debit Cash \$30,000; Credit Owner's Capital \$30,000
• C. Debit Cash \$30,000; Credit Revenue \$30,000
• D. Debit Owner's Capital \$30,000; Credit Cash \$30,000

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the nature of the transaction. Alex is investing cash into his business, which increases the business's assets (Cash) and also increases the owner's equity (Owner's Capital).
2. Step 2: Recall the accounting equation: Assets = Liabilities + Owner's Equity. Since cash is an asset and the investment increases owner's equity, both sides of the equation remain balanced.
3. Step 3: Determine the accounts affected. The Cash account (an asset) will be debited because it is increasing, and the Owner's Capital account (an equity account) will be credited because it is also increasing.
4. Step 4: Apply the double-entry accounting principle. For every transaction, there must be at least one debit and one credit of equal amounts. In this case, Debit Cash \$30,000 and Credit Owner's Capital \$30,000.
5. Step 5: Record the transaction in the ledger accounts. The Cash account will show a debit entry of \$30,000, and the Owner's Capital account will show a credit entry of \$30,000, reflecting the investment made by Alex.