Question

The ledger of Rios Company contains the following balances: Retained Earnings $29,000; Dividends $3,000; Service Revenue $48,000; Salaries and Wages Expense $26,500; and Supplies Expense $7,500. The closing entries are as follows:
(1) Close revenue accounts
(2) Close expense accounts.
(3) Close net income/(loss).
(4) Close dividends.
Prepare the closing entries at December 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

Answer:

(1) Close revenue accounts

Dr. Service Revenue $48,000

Cr. Income Summary $48,000

(2) Close expense accounts.

Dr. Income Summary                     $34,000

Cr. Salaries and Wages Expense $26,500

Cr. Supplies Expense                    $7,500

(3) Close net income/(loss).

Dr. Income Summary                    $14,000

Cr. Retained earning                     $14,000

(4) Close dividends.

Dr. Retained earning $3,000

Cr. Dividends              $3,000

Explanation:

Closing entries are made to close the temporary account at the end of the period. All the revenue, expenses, net income, and dividend account are closed.

All the expense and Revenue accounts are closed into the income summary account. The net balance of income summary account is transferred to Retained earning account. dividend account is also closed in the retained earning account.