At the end of the year, a closing entry to transfer the owner withdrawals from the drawing account to the capital account needs to be made.

Question

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This is because the drawing account balance, which represents the owner's withdrawals from the business for personal use, needs to be cleared to zero at the end of the fiscal year by transferring its balance to the owner's capital account, thus reducing the owner's equity in the business.

At the End of the Year, a Closing Entry to Transfer