Purchasing Land for your Business - How to Record Journal?
Many small business owners will make a personal initial investment as part of the first phase in their start up. Those funds should be deposited into the business bank account and the journal entry to be recorded is similar to below - in this example, $35,000 is the initial investment. The accountant would debit cash and credit capital, this accounting journal is the recording the investment to your business.
Now let's assume that you have leased a location for 2 years and are now planning to purchase land and build your own store front location. The journal entry for the Land would be similar to below (dated, February 27, 2016).
The accountant would reduce the cash general ledger account (with a credit) to reflect land purchase of $20,000 and at the same time record an entry for the land purchase (a debit to Land general ledger account), which is also an asset account for $20,000.
Overall, it does not change your assets total balance - Assets $35,000-$20,000+$20,000 = $35,000.
Source: Corporate Financial Accounting
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