Question

After preparing and posting the closing entries to close revenues (and gains) and expenses (and losses) into the income summary, the income summary account has a debit balance of $33,000. The entry to close the income summary account will include:

a. a debit of $33,000 to owner withdrawals.
b. a credit of $33,000 to owner withdrawals.
c. a debit of $33,000 to income summary.
d. a debit of $33,000 to owner capital.
e. a credit of $33,000 to owner capital.

Answer 1

The entry to close the income summary account with a debit balance of $33,000 will include a debit to owner capital, reflecting a decrease in owner's equity. Therefore, the correct option is D.

Step-by-step explanation:

When the income summary account has a debit balance, it indicates a net loss for the period. To close the income summary account and transfer this loss to the owner's equity section of the balance sheet, you would make an entry that includes a credit to income summary for $33,000 to zero out the account, and a corresponding debit to owner capital for $33,000 as this reflects a decrease in owner's equity due to the loss.

Hence, the correct answer to the student's question is:

• d. a debit of $33,000 to owner capital.