How to Record Capital Entries?

Capital entries are used to record transactions related to the owner's capital — such as funds brought into the business or money withdrawn for personal use. These are manual journal entries passed directly through the Journal Voucher Book in Refrens.

Note: Capital entries are manual journal entries. Make sure Advanced Accounting is enabled for your business before proceeding. Learn how to enable Advanced Accounting >

Steps to Record a Capital Entry

Step 1 — Go to Voucher Books

Navigate to Accounting → Voucher Books from the left sidebar.

From the list of voucher books, click on Journal Voucher Book.

Step 2 — Create a New Entry

Click on + New Entry to open a blank voucher entry form.

Step 3 — Add the Journal Entry Details

Fill in the following:

• Date — The date of the capital transaction
• Voucher No. — Auto-generated
• Narration — Brief description of the entry (e.g., "Capital introduced by owner" or "Capital withdrawn by owner")
• Remark -- Description to be written on line item Basis.

Then add the debit and credit ledger rows as applicable. See the examples below for exact entries.

Step 4 — Save the Entry

Once all rows are filled and amounts are balanced, click:

• Save and Preview — to review the voucher before finalising
• Save and Create New — to save and immediately create another entry

Examples:

Example 1 — Capital Introduced by Owner

Scenario: The owner deposits ₹5,00,000 into the business bank account as capital.

Narration: Capital introduced by owner via bank transfer

Logic: The business receives funds (Bank is debited), and the owner's equity increases (Capital Account is credited).

Example 2 — Capital Withdrawal / Drawings

Scenario: The owner withdraws ₹50,000 from the business for personal use.

Narration: Capital withdrawn by owner for personal use

Logic: The owner's drawings reduce equity (Drawings Account is debited), and the business bank balance decreases (Bank Account is credited).

Things to Keep in Mind

• The Capital Account and Drawings Account should exist under the Capital account group. If not already created, add them via Accounting → Chart of Accounts before passing the entry
• Always ensure the total Debit = Credit before saving — Refrens will not allow saving an unbalanced entry
• Drawings are typically tracked separately from the Capital Account to maintain a clean record of owner withdrawals over the financial year
• For cash transactions, use Cash Account instead of Bank Account in the ledger rows
• Anything other than Cash/Bank brought by owner should be used in the ledger rows with same effect as Cash/Bank.

If you still have questions, reach out to us at care@refrens.com or contact us via chat support for quicker assistance.

Updated on: 07/04/2026