Question

You took ACC111 where the Owner's Equity section consisted of Capital and Owner's Withdrawals. Now that you've seen the corporate structure of the Owner's Equity section, how do the individual items in the Sole Proprietor's Equity section translate to the Corporate Equity section? For example, Revenues are closed out into Capital for Sole Proprietor, Where does it go for Corporate?

Answer 1

Answer:

Revenues are closed out to Equity (Retained Earnings) for Corporate.

Explanation:

Actually, for both Sole Proprietor and Corporate, the account that is closed out to Capital or Equity is the difference between the Revenue and the Expenses for the accounting period.  This is more specifically referred to as Net Income.  This is the bottom-line profit, which is available for distribution to the owners of the entity in the form of capital withdrawals for Sole Proprietorships and dividends for Corporate entities.