Concept:Starting a business with cash means the owner is introducing capital into the business, not buying goods for resale.
Explanation:On July 1, the owner invested
#10,500 to start the business.
This amount is regarded as the owner's capital contribution.
Cash is an asset, so when cash increases, the cash account is debited.
Capital represents the owner's equity, so when capital increases, the capital account is credited.
Thus, the correct double entry on July 1 is:
Debit Cash account with
#10,500 and Credit Capital account with
#10,500.
The payment of
#6,000 to Agromachinex on July 31 is a separate transaction involving settlement of a debt owed to a creditor, so it does not affect the entry for July 1.
Answer:C. debit cash and credit capital.