The entry to close the Withdrawal account was entered in reverse-the Withdrawal account was debited and Capital credited. The result of this error is that:
A) before closing it, Income Summary will have a credit balance.
B) before closing it, Income Summary will have a debit balance.
C) the end of period capital will be understated.
D) the end of period capital will be overstated.

Question

Quizplus · Accepted Answer

The incorrect entry to close the Withdrawal account by debiting Withdrawals and crediting Capital effectively adds to the Capital account instead of reducing it, leading to an overstated end-of-period capital balance.

The Entry to Close the Withdrawal Account Was Entered in Reverse-The