Question

The income statement for the month of June, 2015 of Camera Obscura Enterprises contains the following information:

Revenues
$7,000
Expenses:
Salaries and Wages Expense
$3,000
Rent Expense
1,500
Advertising Expense
800
Supplies Expense
300
Insurance Expense
100
Total expenses
5,700
Net income
$1,300

The entry to close the revenue account includes a
A) debit to Income Summary for $1,300.
B) credit to Income Summary for $1,300.
C) debit to Income Summary for $7,000.
D) credit to Income Summary for $7,000.

Answer 1

The entry to close the revenue account includes a credit to Income Summary for $7,000.

The entry to close the revenue account would involve a credit to Income Summary for $7,000. This is because the revenue account has a credit balance and we want to transfer the balance to the Income Summary account, which is considered a temporary or nominal account. By crediting the Income Summary account, we reduce the revenue balance to zero and prepare for the next accounting period.