Final answer:
To close the Service Revenue account with a credit balance of $6,960, it must be debited and the Income Summary credited by the same amount, effectively zeroing out the Service Revenue account and transferring the revenue for the period to the Income Summary.
Step-by-step explanation:
The process of closing accounts such as Service Revenue is part of the end-of-period accounting procedures. To close Service Revenue with a credit balance of $6,960, you would debit the Service Revenue account and credit the Income Summary account for the same amount, which in this case is $6,960. This action zeros out the revenue account and transfers the balance to the Income Summary account, which is later used to determine the net income or net loss for the period. To reflect the date of this transaction, either at month-end or year-end, typically the last day of the period such as July 31st, is used in the entry.
Service Revenue is an account used to record the income earned by a company from providing services to its customers. In this case, the Service Revenue account has a credit balance of $6,960. When closing the account at the end of an accounting period, the balance is transferred to the Retained Earnings or Income Summary account. Since the total revenue to be closed is $6,960, the corresponding entry would be a debit of $6,960 to Retained Earnings or Income Summary.