Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Closing Entries

Financial Accounting

3. Accrual Accounting Concepts

Closing Entries

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following is the correct journal entry to close the revenue account(s) at the end of the accounting period?

Debit Income Summary; Credit Retained Earnings

Debit Income Summary; Credit Revenue account(s)

Debit Revenue account(s); Credit Income Summary

Debit Revenue account(s); Credit Retained Earnings

Previous problemNext problem

Verified step by step guidance

Understand the purpose of closing entries: Closing entries are made at the end of an accounting period to transfer balances from temporary accounts (like revenue, expenses, and dividends) to permanent accounts (like retained earnings). This resets the temporary accounts to zero for the next period.

Identify the account to be closed: In this case, the revenue account(s) need to be closed. Revenue accounts are temporary accounts that hold income earned during the period.

Determine the normal balance of the revenue account(s): Revenue accounts have a normal credit balance. To close them, you need to debit the revenue account(s) to bring their balance to zero.

Identify the account to which the revenue is transferred: The balance of the revenue account(s) is transferred to the Income Summary account, which is a temporary account used during the closing process.

Record the journal entry: Debit the Revenue account(s) to reduce their balance to zero, and credit the Income Summary account to reflect the transfer of revenue. The journal entry would be: Debit Revenue account(s); Credit Income Summary.