Brittney and Cheryl formed a partnership and agreed to share profits and losses 1/3 to Brittney and 2/3 to Cheryl.If the business incurred a loss of $45,500,then the entry to close out the income summary account would include a:

Question

Quizplus · Accepted Answer

Since the loss will be shared in the ratio of 1:2 (Brittney:Cheryl), Brittney's share of the loss will be
1/3 × $45,500 = $15,167.
Since the business incurred a loss, the income summary account will have a debit balance, and the entry to close out the income summary account would include a credit to income summary. Therefore, the entry would be:

Debit: Brittney, Capital $15,167
Credit: Income Summary $45,500
Credit: Cheryl, Capital $30,333

Hence, option B is the correct answer.

Brittney and Cheryl Formed a Partnership and Agreed to Share