Accounting question(urgent)

1. I suppose you are preparing for a sole proprietorship account or a partnership account: Balance Sheet represents assets/liabilities that exists at the year end which is the worth of the Company to the proprietor or partners. That is why all profits and capital which is being vested in the assets of the company goes to the proprietor/partners.
2. All enteries closed in the accounts will be transferred to profit and loss account. In the old days, it will be done by means of a journal to transfer the profit and loss items to the retained earnings, in your case, the capital account. Now, the accounting software will close the books for you by simply pressing a button.
Hope it helps!

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Why you want to transfer the loss to the Capital account ?
If you leave the balance in the P & L A/c you will have tax examption in the next year or accumulate the losses until you have profit.