LA 8 - service entity steps

Question 1

Step One

Answer 1

Close income accounts off to profit or loss account

Debit: Income Account
Credit: Profit or Loss

Question 2

Step 2

Answer 2

Close expense accounts off to profit or loss account

Debit: Profit or loss
Credit: Expense account

Question 3

Step 3

Answer 3

Close net profit/loss off to capital account

IF PROFIT
* Debit: Profit or loss
* Credit: Capital

IF LOSS
* Debit: Capital
* Credit: Profit or loss

Question 4

Step 4

Answer 4

Close drawing account off to capital account

Debit: Capital
Credit: Drawings