After preparing and posting the closing entries for revenues and expenses, the income summary account has a debit balance of $33,000. The entry to close the income summary account will be:
A) Debit Income Summary $33,000; credit Owner Capital $33,000.
B) Debit Owner Capital $33,000; credit Income Summary $33,000.
C) Debit Income Summary $33,000; credit Owner Withdrawals $33,000.
D) Debit Owner Withdrawals $33,000; credit Income Summary $33,000.
E) Credit Owner Capital $33,000; debit Owner Withdrawals $33,000.

Question

Quizplus · Accepted Answer

Since the income summary account has a debit balance of $33,000, it means that the total expenses for the period exceeded the total revenue. To close the income summary account, we need to transfer the balance to the owner's capital account. Since the income summary account has a debit balance, we need to credit it to bring its balance to zero.

The corresponding debit entry should be made to the owner's capital account because owner's capital represents the owner's equity in the business. Therefore, the entry to close the income summary account will be:

Debit Owner Capital $33,000; credit Income Summary $33,000.

After Preparing and Posting the Closing Entries for Revenues and Expenses