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

Which of the following journal entries correctly closes the revenue accounts at the end of the accounting period?

Debit all revenue accounts; Credit Income Summary

Debit Retained Earnings; Credit all revenue accounts

Debit all expense accounts; Credit Income Summary

Debit Income Summary; Credit all revenue accounts

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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 and expense accounts) to permanent accounts (like Retained Earnings). This process resets the temporary accounts to zero for the next period.

Focus on closing revenue accounts: Revenue accounts are temporary accounts, and their balances need to be transferred to the Income Summary account during the closing process. This step ensures that the revenue is summarized before being transferred to Retained Earnings.

Determine the correct journal entry for closing revenue accounts: To close revenue accounts, you need to debit (reduce) the revenue accounts to bring their balances to zero and credit (increase) the Income Summary account to reflect the total revenue for the period.

Analyze the options provided: The correct journal entry for closing revenue accounts is 'Debit all revenue accounts; Credit Income Summary.' This matches the process described in the previous step.

Understand the subsequent steps: After closing revenue accounts, the Income Summary account will eventually be closed to Retained Earnings, and expense accounts will also be closed to the Income Summary account. These steps complete the closing process for the accounting period.