Final answer:
To close the revenue account, a debit entry is made to the revenue account, and a credit entry is made to either the income summary or retained earnings on December 31, 2020. This resets the revenue account for the new fiscal year and transfers earnings to a permanent equity account.
Step-by-step explanation:
The journal entry recorded as of December 31, 2020 to close the revenue account would typically involve debiting the revenue account and crediting the income summary or retained earnings account. This process is part of the year-end closing entries that move the balances of temporary accounts (like revenues, expenses, and dividends) to permanent accounts. Here is an example of such a closing entry:
- Debit: Revenue Account
- Credit: Income Summary/Retained Earnings
The purpose of this entry is to zero out the revenue account balance and transfer the year's earnings to a permanent equity account.