Blair Scott started a sole proprietorship by depositing $40,000 cash in a business checking account. During the accounting period, the business borrowed $20,000 from a bank, earned $5,800 of net income, and Scott withdrew $7,000 cash from the business. Based on this information, what is the balance in Scott’s capital account at the end of the accounting period?

$38,800

Explanation:

You can find the balance at the end of the accounting period using the following formula:

Ending capital= Beginning capital+Contributions-Withdrawals+Net Income

Beginning capital= 0

Contributions= 40,000

Withdrawals= 7,000

Net Income= 5,800

Ending capital= 0+40,000-7,000+5,800

Ending capital= 38,800

According to this, the answer is that the balance in Scott’s capital account at the end of the accounting period is $38,800.

Ending capital= $38,800

Explanation:

Capital account measures a change in ownership funds of a business in a given period.

In this scenario to calculate Scott's capital account at the end of the accounting period we use the following formula

Ending capital= Beginning capital + contributions - withdrawals + Net income

Beginning capital= 0

Contribution= 40,000

Withdrawal= 7,000

Net income= 5,800

Ending capital= 0 + 40,000 - 7,000 + 5,800

Ending capital= $38,800

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