Demetria Davis, the bookkeeper for Home Interiors and Designs Company, has just finished posting the closing entries for the year to the ledger. She is concerned about the following balances:

Capital account balance in the general ledger: ........$97,100

Ending capital balance on the statement of owner’s equity: ... 55,600

Davis knows that these amounts should agree and asks for your assistance in reviewing her work. Your review of the general ledger of Home Interiors and Designs Company reveals a beginning capital balance of $50,000. You also review the general journal for the accounting period and find the closing entries shown below.

1. What errors did Ms. Davis make in preparing the closing entries for the period?
2. Prepare a general journal entry to correct the errors made.
3. Explain why the balance of the capital account in the ledger after closing entries have been posted will be the same as the ending capital balance on the statement of owner’sequity.

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GENERAL JOURNAL PAGE-15- POST REF DATE DESCAIPTION DEBIT CREDIT Closing Entries 1 2016 2Dec. 31 Fees Income Accumulated Depreciotion Accounts Payable Inome Summary 98 000 00 8 500 od 33 000 00 139 5 0 0 00B 31 Income Summary 92 400 00 Salaries Expense Supplies Expense Depreciation Expense 78 00 0 00 5 00 0 00 2 4 00 00 10 7 000 0011 12 12 14 10 Thomas Richey, Drawing 12 14