Wilson Reed, the bookkeeper for Home Interior Improvements and Designs Company, has just finished posting the closing entries for the year to the ledger. He is concerned about the following balances:
Capital account balance in the general ledger:.......................$48,550
Ending capital balance on the statement of owner's equity:.........27,800
Wilson knows that these amounts should agree and asks for your assistance in reviewing his work.
Your review of the general ledger of Home Interior Improvements and Designs Company reveals a beginning capital balance of $25,000. You also review the general journal tor the accounting period and find the closing entries shown on the next page.
1. What errors did Mr. Reed 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's equity.

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GENERAL JOURNAL PAGE 75 POST REF DESCRIPTION DEBIT CREDIT Closing Entries 1 2013 2 Dec, 49000 00 4250 00 16 500 00 31 Fees Income Accumulated Depreciation Accounts Poyable 697: 510100 Income um 31 Income Summary 6200 00 Salaries Expense Supplies Expense Depreciotion Expense James Wolker, Drawing 39000 00 8 2500 00 9 1 2 00 00 10 31501 01 00 11 12 12 14