Multiple Choice
Which of the following accounts will be debited in the closing entry at the end of the year?
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3. Accrual Accounting Concepts
Closing Entries
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Which of the following best describes the journal entry to close the revenue account at the end of the accounting period?
A
Debit Revenue; Credit Retained Earnings
B
Debit Income Summary; Credit Expenses
C
Debit Revenue; Credit Income Summary
D
Debit Income Summary; Credit Revenue
Verified step by step guidance1
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 and expenses) to permanent accounts (like retained earnings or income summary). This resets the temporary accounts to zero for the next period.
Identify the accounts involved: In this case, the revenue account needs to be closed. The revenue account has a credit balance, so to close it, you need to debit the revenue account.
Determine the account to credit: The revenue account's balance is transferred to the Income Summary account during the closing process. Therefore, you need to credit the Income Summary account.
Write the journal entry: The journal entry to close the revenue account will be structured as follows: Debit Revenue and Credit Income Summary.
Verify the logic: Ensure that the revenue account is reduced to zero and the balance is correctly transferred to the Income Summary account, which will later be used to calculate net income and close to retained earnings.
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