Question

After closing entries are posted, the balance of the owner's Capital account agrees with the amount of Owner's Equity shown on the Balance Sheet for the period.

A. True
B. False

Answer 1

The balance of the owner's Capital account does agree with the amount of Owner's Equity shown on the Balance Sheet after closing entries are made, this is true. The closing entries are meant to update the Capital account, ensuring the balance sheet's accuracy in reflecting a company's financial position.

Step-by-step explanation:

The question addresses a concept in accounting related to the closing entries of an accounting period and their impact on the balance of the owner's Capital account on the Balance Sheet. The answer is A. True. After closing entries are posted, the balance in the owner's Capital account should agree with the amount of Owner's Equity displayed on the Balance Sheet for that period. This agreement occurs because the closing entries serve to update the Capital account with the results of the period's operations, such as profits retained in the business or losses sustained.

It's important to note that the T-account plays a role in understanding the relationship between assets, liabilities, and owner's equity. While a T-account does not directly show the owner's equity, it illustrates how a company's assets are on one side and liabilities and owner's equity on the other. The assets of a firm should always equal its liabilities plus net worth, and this underlying accounting equation ensures that balance sheets balance, which reflects accurately on the owner's Capital account.

Answer 2

After closing entries are posted, the balance of the owner's Capital account agrees with the amount of Owner's Equity shown on the Balance Sheet for the period. True.

Step-by-step explanation:

When closing entries are completed at the end of an accounting period, the revenues, expenses, and dividends accounts are closed or zeroed out to the owner's capital account. This process ensures that the net income or loss for the period gets transferred to the owner's equity section. Consequently, the balance of the owner's Capital account reflects the updated amount of Owner's Equity, which matches the figure displayed on the Balance Sheet, offering a reconciliation between the two.

So, after the closing entries, the balance in the owner's Capital account will accurately represent the Owner's Equity reported on the Balance Sheet for that specific period.

Correct answer: A. True.