Final answer:
To close out a net loss from the Income Summary to the capital account, debit the Income Summary and credit the Owner's Capital for the amount of the net loss, reducing the owner's equity in the business.
Step-by-step explanation:
If a business had a net loss for the period, the journal entry to close out the balance of the Income Summary account into the capital account would involve debiting the Income Summary account and crediting the owner's capital account. This entry transfers the net loss to the capital account, which decreases the owner's equity in the business. The entry would look like this:
- Debit Income Summary (for the amount of the net loss)
- Credit Owner's Capital (for the amount of the net loss)
This action reflects the reduction in equity that occurs because the company's expenses exceeded its revenues during the accounting period, leading to a loss.