Question

Tara Westmont, the proprietor of Tiptoe Shoes, had annual revenues of $185,000, expenses of $103,700, and withdrew $18,000 from the business during the current year. The owner's capital account before closing had a balance of $297,000. The entry to close the Income Summary account at the end of the year, after revenue and expense accounts have been closed, is:

Answer 1

Answer:

Explanation:

The closing entry of the income summary account is shown below:

Income summary A/c Dr   $81,300

    To Retained Earning A/c             $81,300

((Being the difference is credited to retained earning))

The retained earning balance is calculated by taking a difference between:

= Annual revenues - Expenditure

= $185,000 - $103,700

= $81,300

The income summary should always be closed after closing of revenue and expenditure account.