At the end of the accounting period,but before the closing entries have been recorded,Doug,the proprietor of Pepper's Cafe,has a debit of $12,250 in his drawing account and a credit of $63,400 in his capital account.If his capital account has a credit balance of $68,950 after the closing,what was his net income?
A)$5,550
B)$17,800
C)$56,700
D)$6,700

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 net income of the proprietorship is also closed to the capital account of the owner.
Ending capital = Beginning capital + Net Income − Drawings
Net income = Ending capital − Beginning capital + Drawings
= $68,950 − $63,400 + $12,250 = $17,800

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