Which of the following entries records the closing of Penny Pincher,Drawing at the end of the accounting period?
A) Debit Penny Pincer,Drawing;credit Penny Pincher,Capital
B) Debit Penny Pincher,Capital;credit Income Summary
C) Debit Income Summary;credit Penny Pincher,Drawing
D) Debit Penny Pincher,Capital;credit Penny Pincher,Drawing

Question

Quizplus · Accepted Answer

The closing entry for Penny Pincher,Drawing involves transferring the balance of Drawing (which is a contra equity account) to the Capital account. This is done to reset the Drawing account to zero for the next accounting period. The correct entry for this is to debit Penny Pincher,Capital (which increases it) and credit Penny Pincher,Drawing (which decreases it to zero). Thus, option D is the correct choice as it records the closing of Penny Pincher,Drawing by debiting Penny Pincher,Capital and crediting Penny Pincher,Drawing.

Which of the Following Entries Records the Closing of Penny