Question

The Retained earnings account has a credit balance of $37,000 before closing entries are made. Total revenues for the period are $55,200, total expenses are $39,800, and dividends are $9,000. What is the correct closing entry for the revenue accounts?

Answer 1

Answer:

Revenues debit 55,200

Income Summary credit 55,200

to close revenues temporary accounts

Explanation:

The dividend and expenses are irrelevant to the closing entry of the revenues. Each has his own closing entry.

To close the revenues and expenses accounts we use Income Summary account. Doing one entry for each.

Once we close both, we close Income Summary against Retained Earnings.

Income Summary account is used for this pourpose only.