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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

Write the third closing entry to transfer the net income or net loss to the P. Hernandez, Capital account, assuming the following:

  1. a. A net income of $3,842 during the first quarter (Jan.–Mar.)
  2. b. A net loss of $1,781 during the second quarter (Apr.–Jun.)

a.

To determine

Prepare journal entry to close net income to capital account.

Explanation

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Closing entries: The journal entries prepared to close the temporary accounts to capital account are referred to as closing entries. The revenue, expense, and drawing accounts are referred to as temporary accounts because the information and figures in these accounts is held temporarily and consequently transferred to permanent account at the end of accounting year.

Prepare journal entry to close net income to capital account.

DateAccount Titles and ExplanationsPost...

b.

To determine

Prepare journal entry to close net loss to capital account.

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