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

Debit Revenue; Credit Retained Earnings

Debit Income Summary; Credit Revenue

Debit Income Summary; Credit Expenses

Debit Revenue; Credit Income Summary

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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 expenses) to permanent accounts (like retained earnings). This process 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 to bring its balance to zero.

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 is: Debit Revenue; Credit Income Summary. This reflects the transfer of the revenue balance to the Income Summary account.

Understand the flow of closing entries: After closing the revenue account, the Income Summary account will eventually be closed to Retained Earnings, and expenses will also be closed to the Income Summary account. This ensures all temporary accounts are reset for the next accounting period.