Question

After preparing and posting the closing entries for revenues and expenses, the income summary account has a debit balance of $33,000. The entry to close the income summary account will be:

a. Debit Dividends $33,000; credit Income Summary $33,000

b. Debit Income Summary $33,000; credit Dividends $33,000

c. Debit Income Summary $33,000; credit Retained Earnings $33,000

d. Debit Retained Earnings $33,000; credit Income Summary $33,000

Answer 1

The correct answer is D

Step-by-step explanation:

Closing entries are those journal entries which are used in order to transfer the balances of the temporary accounts to the accounts that are permanent.

So, the expenses and the revenues are transferred to the account of Income Summary, the balance which defines the business income for the year. And for the closing the account, it is closed to Retained Earnings (RE).

Therefore, the entry would be:

Retained Earnings A/c.............................Dr $33,000

Income Summary A/c...........................Cr $33,000