Tut, thanks for the response. If your are saying that the $4150 entry in “Starting Balance” is because the entry I made for the open invoice is not balanced somewhere, that is beginning to make sense. The fact that the Starting Balance appears is to indicate that something is out of balance prior to the operation of 2017, correct? I just need to find out how the entry should be balanced.
With regard to the closing entry, I am sure that it is incorrect as I need to make the entries for the allocation of profit. However, when the year end is closed in preparation for the new fiscal year, my understanding is that the Drawing account should be closed back to the capital account so that the beginning balance for the next fiscal year is correct. The cash has already been removed from the asset balances.
Step 4: Close withdrawals to the capital account
Note: This step is applicable only to sole proprietorships and partnerships.
In a sole proprietorship, a drawing account is maintained to record all withdrawals made by the owner. In a partnership, a drawing account is maintained for each partner. Drawing accounts are closed to capital at the end of the accounting period.
Our example is a sole proprietorship business. Mr. Gray’s withdrawals are recorded in Mr. Gray, Drawing. To close the drawing account to the capital account, we credit the drawing account and debit the capital account. Notice that drawings decrease capital.
Mr. Gray, Capital 7000.00 DR
Mr. Gray, Drawing 7000.00 CR
End of example.
Once that entry is posted and the year is rolled to the new F.Y. then the beginning Equity (Retained Earnings) should be the ending equity balance from the previous year. I will play around with all this and report back. Again, thank you all for your input. I very much appreciate the help.