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accounts. You’ll first need to zero out that account. To zero out the credit you’ll need to apply five thousand dollars in debit to the income summary account. You must do the opposite to the capital
account. The capital account must reflect five thousand dollars in credit. Which will decrease the total capital for the business. The last step in the closing process is closing out the owner’s withdrawals accounts. Once again you’ll want to zero it out. Since an owner withdrawal is recorded as a debit you’ll need to credit that account and instead of negating the transaction in the income summary account you’ll actually post it directly in the business’s capital account. Closing all temporary accounts is important. It’s important because it’s always critical to track a business’s current net income loss or profit. Closing your temporary accounts and going through the closing process allow you to see a business’s loss or profit for that period. References:Nobles T., Mattison B. & Matsumura E.M. (2014). Horngren’s Accounting.Saddle River, New Jersey: Pearson Education, INC.Taking these accounts and calculating them allows you to look at your current ratio which is your total currents assets divided by your total current liabilities.