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The capital account basically is used to show profits and losses.
The profit or loss is posted from the Profit and Loss summary account to the capital account.
I am not an accounting student. Need more clarification on all these Stuff
The profit or loss is posted from the Profit and Loss summary account to the capital account
capital account begin with your expenditure
Accounting -> The capital account The capital account The profit or loss is posted from the Profit and Loss summary account to the capital account. Drawings will also be closed off to the capital account. The 'content' of the capital account is repeated in the balance sheet with net profit added to capital and drawings deducted. Capital account 31 Mar. Drawings 6 000 1 Mar. Balance 20 000 Balance 16 300 31 Mar. Profit and Loss summary a/c 2 300 22 300 22 300
net profit or loss should be transferred to balance sheet. Net profit should be added and loss should be deducted; drawing can also be deducted from capital to find out exactly capital.
of course!
Why is the profit or loss posted from the Profit and Loss summary account to the capital account?
The profit or loss is posted from the Profit and Loss summary account to the capital account. Drawings will also be closed off to the capital account.