If my company receives an inheritance and contributes 10,000 in cash to the business, how should i jounalize this?

CaptainForest

What?

If the company is receiving the inheritance, then they are the ones receiving the cash.

Please clarify.

hippie84

then i will debit cash but what should i credit?

CaptainForest

So you are saying that the inheritance the company is receiving is cash in the amount of $10,000?

Dr. Cash 10,000
Cr. Donated Capital 10,000

hippie84

thanks a lot. Yes, the inheritance is in cash. I do have 1 more question. when you credit Capital, it means your capital increases? But i thought capital was one kind of asset, should it be debited when increase?

CaptainForest

Correct.


When Capital or Liabilities increase, you CREDIT it. When it decreases, you DEBIT it.

Assets are the reverse. When an asset increases, you DEBIT it, when it decreases, you CREDIT it.

That is why ASSETS = LIABILTIES + CAPITAL

hippie84

thanks again, i appreciate it

CaptainForest

you're welcome