Adewale opened his accounting books on 1st January with the following balances extracted f… — JAMB UTME

Adewale opened his accounting books on 1st January with the following balances extracted for an opening journal entry: Delivery Van $\text{₦}450,000$ , Inventory $\text{₦}180,000$ , Trade Debtors $\text{₦}90,000$ , Cash in Hand $\text{₦}30,000$ , Trade Creditors $\text{₦}140,000$ , and Bank Loan $\text{₦}110,000$ . What is the amount of Capital (in $\text{₦}$ ) to be credited in the General Journal?

Answer: 500000 ₦

Answer

The Capital to be credited in the General Journal is

\text{₦}500,000

The General Journal opening entry records total assets of

\text{₦}750,000

on the debit side and total liabilities of

\text{₦}250,000

on the credit side. The balancing amount credited to the Capital Account is computed as

\text{Capital} = \text{Assets} - \text{Liabilities} = \text{₦}750,000 - \text{₦}250,000 = \text{₦}500,000

Step-by-Step Solution

Calculate total assets by adding all asset balances

Total Assets =

\text{₦}450,000 + \text{₦}180,000 + \text{₦}90,000 + \text{₦}30,000 = \text{₦}750,000

Opening entries require debiting all assets of the business.

Calculate total liabilities by adding all external obligations

Total Liabilities =

\text{₦}140,000 + \text{₦}110,000 = \text{₦}250,000

Opening entries require crediting all liabilities owed to external parties.

Deduct total liabilities from total assets to determine the opening capital

Capital =

\text{₦}750,000 - \text{₦}250,000 = \text{₦}500,000

According to the fundamental accounting equation,

\text{Capital} = \text{Total Assets} - \text{Total Liabilities}

Key Concept

Opening entries in the General Journal (Journal Proper) establish the initial accounting records of a business by recording assets as debits, liabilities as credits, and balancing the entry by crediting Capital using

\text{Capital} = \text{Assets} - \text{Liabilities}

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