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

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Multiple Choice

To which of the following accounts should the balance in the Income Summary account be closed at the end of the accounting period?

Retained Earnings

Common Stock

Dividends

Cash

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Verified step by step guidance

Understand the purpose of the Income Summary account: It is a temporary account used during the closing process to summarize revenues and expenses for the period.

Recognize that at the end of the accounting period, the balance in the Income Summary account represents the net income or net loss for the period.

Determine where the net income or net loss should be transferred: In most cases, it is closed to the Retained Earnings account, as this account reflects the accumulated earnings of the company.

Note that Common Stock, Dividends, and Cash are not accounts where the Income Summary balance is closed. Common Stock represents ownership equity, Dividends are distributions to shareholders, and Cash is an asset account.

Conclude that the correct account to close the Income Summary balance to is Retained Earnings, as it aligns with the purpose of summarizing and transferring the period's net income or loss to the equity section of the balance sheet.