On 1 January, John invested his savings of K25000 and a personal bank loan of K40000 to start in the new business.
1. What accounts are affected?
2. What type of accounts are they?
1. The accounts affected would be:
- Cash account: to record the K25000 investment
- Loan account: to record the K40000 personal bank loan
2. The cash account is an asset account, representing the amount of cash John invested in the business. The loan account is a liability account, representing the amount of money John borrowed from the bank for the business.