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In: Accounting

15. Ringo Starr is the owner of Ringo Ring Cleaners. He withdrew $20,000 during the year....

15. Ringo Starr is the owner of Ringo Ring Cleaners. He withdrew $20,000 during the year. In closing out this account at year end, what journal entry would you make to wipe out the balance so that the account restarts from zero for the following year?

Solutions

Expert Solution

Before closing following balance must be showing like this in the trial balance
Trail Balance
Account Name Debit Credit
Ringo Starr, Drawing balance                                20,000
Now to close this account following entry would be passed
Account Name Debit Credit
Income Summary                                20,000
        Ringo Starr, Drawing balance                                  20,000
(To close drawing account)
Further, Income summary is also closed to Capital account by following entry
Ringo Starr, Capital balance (With the balance of Income summary a/c)
           Income Summary (With the balance of Income summary a/c)

ekkarill92 answered 2 years ago
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