Question

When pulling the owner's capital balance from the end-of-period spreadsheet into the statement of owner's equity, why is it also important to check the owner's capital account in the general ledger?

1) There may have been additional losses incurred during the year reflected in the balance.
2) There may have been additional withdrawals made during the year reflected in the balance.
3) There may have been additional investments made during the year reflected in the balance.
4) There may have been additional income made during the year reflected in the balance.

Answer 1

The owner's capital account in the general ledger 2) There may have been additional withdrawals made during the year reflected in the balance.

Step-by-step explanation:

When pulling the owner's capital balance from the end-of-period spreadsheet into the statement of owner's equity, it is important to check the owner's capital account in the general ledger for several reasons. One crucial consideration is the possibility of additional withdrawals made by the owner during the year that may not be reflected in the end-of-period spreadsheet.

The owner's capital account in the general ledger provides a comprehensive record of various transactions, including withdrawals, investments, and income. By cross-referencing the end-of-period spreadsheet with the general ledger, you can identify any additional withdrawals made by the owner during the year. These withdrawals directly impact the calculation of the owner's equity and need to be accurately reflected in the statement of owner's equity.

While options 1, 3, and 4 mention different financial activities that could impact the owner's capital, the specific concern addressed in this explanation is the possibility of additional withdrawals. It is crucial to ensure that all relevant financial transactions are considered to provide an accurate representation of the owner's equity in the statement of owner's equity.

In summary, checking the owner's capital account in the general ledger is essential to identify any 2) There may have been additional withdrawals made during the year reflected in the balance, ensuring the accuracy of the statement of owner's equity.