When closing the Income Summary account when there is a net loss,
A) Capital would increase.
B) Capital would decrease.
C) Capital would remain the same.
D) None of these are correct.

Question

Quizplus · Accepted Answer

When there is a net loss, the Income Summary account will have a debit balance. To close the Income Summary account, the balance is transferred to the Capital account. Since the Income Summary account has a debit balance, it will decrease the Capital account, resulting in a decrease in the owner's equity. Therefore, the Capital account would decrease.

When Closing the Income Summary Account When There Is a Net