At the end of the accounting period,but before closing entries are made,Doug,the proprietor of Pepper's Cafe,has a debit balance of $12,250 in his drawing account and a credit balance of $36,150 in his capital account.Which of the following statements is correct?
A)Doug's net income was $23,900.
B)During the closing process,Doug will debit the drawing account for $12,250 and credit the capital account for $12,250.
C)During the closing process,Doug will debit the capital account for $12,250 and credit the drawing account for $12,250.
D)Doug's Retained Earnings account was $23,900.

Question

Quizplus · Accepted Answer

A sole proprietorship uses a drawing account to record distributions to the owner during a year.At the end of the year,the balance in the account is transferred to the capital account of the owner.The entry includes a debit to the capital account and a credit to the drawing account for $12,250,the balance in the drawing account.

At the End of the Accounting Period,but Before Closing Entries