Final answer:
The question refers to the closing entries in accounting at the end of an accounting period, requiring revenue accounts to be debited, expense accounts to be credited, and the net change in income or loss to be reflected in the owner's capital account. T-accounts are used to represent these transactions, separating assets on the left and liabilities plus net worth on the right.
Step-by-step explanation:
The question deals with the closing entries in accounting which are made at the end of an accounting period. This is the process where you debit each revenue account for its balance, credit each expense account for its balance, and close the net income (or net loss) into the owner's capital account.
Essentially, the process ensures that the revenue and expense accounts are reset to zero for the start of the new accounting period, and the net income (or loss) has been allocated to the owner's capital account, reflecting the change in the owner's equity.
T-accounts are instrumental in visualizing the effects of transactions on the various accounts. A T-account has a simple structure, with the left side representing debits and the right side representing credits. Assets, which are the resources owned by the firm such as cash, loans made, and securities, are listed on the left side.
Liabilities, which denote what the firm owes and include deposits and other obligations, along with the net worth (or bank capital), are listed on the right side. In a T-account, or any balance sheet, assets should always equal liabilities plus net worth.