### Answer Evaluation
1. **Understanding the Statement**: The statement suggests that a net loss is transferred to the capital account by making a debit to the Income Summary account and a credit to the capital account.

2. **Accounting Principles**: In accounting, if a business incurs a net loss, it negatively impacts the equity of the business. The Income Summary account is used to summarize revenues and expenses at the end of an accounting period. When closing accounts, the net loss would indeed be debited to the Income Summary, but it is actually the capital account (or retained earnings, depending on the structure) that is debited, not credited.

3. **Conclusion**: Therefore, the correct action when closing a net loss will not involve crediting the capital account. Instead, the capital account would be decreased.

### Final Answer
**False**: The correct entry for closing a net loss involves debiting the capital account (or retained earnings) and crediting the Income Summary, not the other way around.

Question

### Answer Evaluation
1. **Understanding the Statement**: The statement suggests that a net loss is transferred to the capital account by making a debit to the Income Summary account and a credit to the capital account.
  
2. **Accounting Principles**: In accounting, if a business incurs a net loss, it negatively impacts the equity of the business. The Income Summary account is used to summarize revenues and expenses at the end of an accounting period. When closing accounts, the net loss would indeed be debited to the Income Summary, but it is actually the capital account (or retained earnings, depending on the structure) that is debited, not credited.

3. **Conclusion**: Therefore, the correct action when closing a net loss will not involve crediting the capital account. Instead, the capital account would be decreased.

### Final Answer
**False**: The correct entry for closing a net loss involves debiting the capital account (or retained earnings) and crediting the Income Summary, not the other way around.

Knowee AI · Accepted Answer

### Answer Evaluation
1. **Understanding the Statement**: The statement suggests that a net loss is transferred to the capital account by making a debit to the Income Summary account and a credit to the capital account.
  
2. **Accounting Principles**: In accounting, if a business incurs a net loss, it negatively impacts the equity of the business. The Income Summary account is used to summarize revenues and expenses at the end of an accounting period. When closing accounts, the net loss would indeed be debited to the Income Summary, but it is actually the capital account (or retained earnings, depending on the structure) that is debited, not credited.

3. **Conclusion**: Therefore, the correct action when closing a net loss will not involve crediting the capital account. Instead, the capital account would be decreased.

### Final Answer
**False**: The correct entry for closing a net loss involves debiting the capital account (or retained earnings) and crediting the Income Summary, not the other way around.

Net loss is closed to capital by debiting Income Summary and crediting capital account.Select one:TrueFalse

Question

Net loss is closed to capital by debiting Income Summary and crediting capital account.

Solution

Answer Evaluation

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