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

question 245

Multiple Choice

At the end of the accounting period,but before closing entries are made,Harry,the proprietor of Harry's Bar and Grill,has a debit balance of $24,500 in his drawing account and a credit balance of $72,300 in his capital account.Which of the following statements is correct?

• A) Harry's net income was $47,800.
• B) During the closing process, Harry will debit the drawing account for $24,500 and credit the capital account for $24,500.
• C) During the closing process, Harry will debit the capital account for $24,500 and credit the drawing account for $24,500.
• D) Harry's Retained Earnings account was $47,800.

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Definitions:

Cleared

Refers to transactions that have been reconciled and confirmed by a bank or financial institution, indicating that funds have been successfully transferred.

Reconciled

The process of ensuring that two sets of records (usually the balances of two accounts) are in agreement, confirming the accuracy of financial transactions.

Timing Differences

Discrepancies between the time a transaction is recognized in financial statements and the actual time the transaction occurs, affecting financial reporting.

Bank Errors

Mistakes made by a bank in recording transactions in an account holder's records.