Multiple Choice
Which of the following is the correct journal entry to close all expense accounts at the end of the accounting period?
122
views
3. Accrual Accounting Concepts
Closing Entries
Multiple Choice
Which of the following journal entries correctly closes the revenue accounts at the end of the accounting period?
A
Debit all revenue accounts; Credit Income Summary
B
Debit Retained Earnings; Credit all revenue accounts
C
Debit all expense accounts; Credit Income Summary
D
Debit Income Summary; Credit all revenue accounts
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 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.
Related Videos
Related Practice
