Question

Prepare the closing entry for Happy Smiles Corp., which had sales revenue of 55,200 and interest revenue of 4,200?

Answer 1

To close Happy Smiles Corp.'s revenue accounts, we debit Sales Revenue and Interest Revenue, and credit the Income Summary account with the total amounts. This transfers the total revenue for the period into the Income Summary for further closing processes.

Step-by-step explanation:

To prepare the closing entry for Happy Smiles Corp., which had sales revenue of $55,200 and interest revenue of $4,200, we must transfer these balances to the Income Summary account. The closing entry process includes zeroing out all revenue accounts by debiting them and crediting the Income Summary account.

1. Debit Sales Revenue: $55,200
2. Debit Interest Revenue: $4,200
3. Credit Income Summary: $59,400

This entry effectively transfers the total revenue into the Income Summary, which is subsequently used to close out all expenses, ultimately leading to the calculation of the net income or loss for the period that will be transferred to Retained Earnings.