Question

The income summary account has a debit balance of $10,000 prior to closing. the owner's drawing account has a balance of $7,000 before closing. the owner's capital account will

Answer 1

Decrease by $17,000.

An income summer with a debit balance means that the company had a loss in that accounting cycle. In order to close an income summary with a debit balance you need to credit the income summary account and debit the capital account, which decreases the owner’s equity.

The drawing account is the money that the owner has withdrawn from the company. In order to close this account you will need to credit drawing and debit the capital account, which decreases the balance.

Both items will decrease the capital account, for a total of $17,000.