Question

The Retained earnings account has a credit balance of $43,000 before closing entries are made. Total revenues for the period are $61,200, total expenses are $42,800, and dividends are $11,400. What is the correct closing entry for the revenue accounts?

a. Debit Revenue accounts $61,200; credit Income Summary $61,200.

b. Debit Revenue accounts $43,000; credit Retained earnings $43,000.

c. Debit Income Summary $61,200; credit Revenue accounts $61,200.

d. Debit Income Summary $43,000; credit Retained earnings $43,000.

e. Debit Revenue accounts $61,200; credit Retained earnings $43,000.

Answer 1

The correct answer is a) Debit Revenue accounts $ 61200; credit income Summary $ 61200

Explanation

We now that income and revenue accounts has credit balance and in order to close them we have to debit them. As income at the end of the year are transferred to income summary account, so income summary account will be credited. and these both accounts that is revenue account and income summary will be debited and credited, respectively by $ 61200.

So the correct answer is a) Debit revenue account $ 61200; credit income summary $ 61200