The Entry to Close Income Summary (Net Loss) to Capital

question 112

Multiple Choice

The entry to close Income Summary (net loss) to Capital was omitted. This error will cause:

• A) the ending capital to be overstated.
• B) the ending capital to be understated.
• C) no error in the ending capital balance.
• D) None of these is correct.

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Definitions:

Capital Balances

Reflects the amount of capital that each partner or shareholder has contributed to a partnership or corporation, or their ownership stake.

Partners' Capital Statement

A financial statement showing the changes in each partner's capital account of a partnership during a specific period.

Partnership Expenses

Costs incurred by a partnership in the course of its business activities, which are shared by the partners.

Additional Investments

Extra funds put into a business by its owners or shareholders, beyond the initial investment, to support operations, growth, or expansion.