Question

In your names beach barkers, the entry to transfer net income to capital is made by debiting _______ and crediting ______.

a) Income, Capital
b) Expenses, Income
c) Income, Expenses
d) Retained Earnings, Capital

Answer 1

The transfer of net income to the owner's capital account is recorded by debiting the Income Summary account and crediting the Capital account.

Step-by-step explanation:

The question relates to the journal entry used to transfer net income to the owner's capital account in accounting records. In a sole proprietorship or partnership, at the end of the accounting period, the net income is transferred to the owner's capital account to update it for the earnings of the period. This is done by debiting the Income Summary account (which temporarily holds income and expenses to calculate net income) and crediting the owner's Capital account, thus the correct entry to reflect the transfer of net income is to debit Income Summary and to credit the Capital account, which corresponds to option a) Income, Capital.