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ABC is a profitable company. Which of the following journal entries would it make to close its income summary account?

a. Debit Income Summary, Credit Retained Earnings
b. Debit Retained Earnings, Credit Income Summary
c. Debit Retained Earnings, Credit Dividends
d. Debit Income Summary, Credit Dividends

1 Answer

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Final answer:

The correct journal entry to close the income summary account for a profitable company like ABC is to debit retained earnings and credit income summary.

Step-by-step explanation:

To close the income summary account, ABC Company would make the following journal entry: Debit Retained Earnings and Credit Income Summary.

This entry transfers the balance of the income summary account to the retained earnings account, effectively closing the temporary account and reflecting the company's profits as retained earnings.

It is important to note that option B: Debit Retained Earnings, Credit Income Summary, is the correct journal entry to close the income summary account.

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