in accounting, why owner's capital belongs to credit account?

Question

when cash is earned, assets is increased in debit account. why capital is increased in credit account?

Answer 1

1. In accounting it is the concept of seprate entity. It means business is the separate entity and the owner is a seprate entity regardless how small or large is the business.
2. When that concept is clear then think that business firm is an artificial person as like you are or any common man.
3. As you have to pay and receive money regardless you have received or paid to your mother. In the same way the firm has to pay the amount that you have invested in it as an owner.

So, the amount the firm has to pay is a credit so owner's capital is also a credit that the firm has to pay to the owner.
But it is showed under owner's equity cap.

Answer 2

Because debits have to equal credits in a double entry bookkeeping system.

The JE for a cash sale is:

DEBIT: Cash $100
CREDIT: Revenue $100

Obviously, since the revenue account is temporary, it gets moved to the O/E account when the books close for the month.



PS to Trader: equity accounts can have debit enties and even balances. for example, when a dividend gets paid you Dr Equity and Cr cash. Firms can also have accumulated losses that are greater that equity invested in the firm. In this case, the firm would have a debit balance for net equity.

Answer 3

I wonder if you are getting confused with the terms "debit" and "credit". Please do not fall into a common misconception that debits are always bad and credits are always good. Debit and credit is just a name.

Two important things to remember: 1) Debits must equal credits and 2) Assets must equal Liabilities plus Equity. Another way to think of it is that Assets minus Liabilities must equal Equity

Answer 4

because that shows how much money the owner of the business has invested in it. it wouldnt be a debit because it is not an asset.