Final answer:
To close the revenue account(s), debit the revenue account for its balance and credit the Income Summary account. This zeros out the revenue accounts and moves the balance to the Income Summary, which captures the company's performance for the period.
Step-by-step explanation:
To close the revenue account(s), you need to make an entry that moves the balances from the revenue accounts to the Income Summary account. This is a typical step in the end-of-period accounting process which helps to prepare the company's books for the new fiscal period.
If we assume that the company has a single revenue account called 'Sales', the closing entry would look like this:
- Debit Sales
- Credit Income Summary
The amount of this entry would be equal to the balance in the Sales account, effectively bringing it to zero. To illustrate, if the Sales account had a balance of $50,000, the entry would be:
- Debit Sales for $50,000
- Credit Income Summary for $50,000
Sales is debited because revenue accounts have credit balances and debiting them removes the balance (closes the account). The Income Summary account is credited because it captures the net result of all revenue and expense accounts for the period. After all revenues and expenses have been closed to Income Summary, it will show the company's net income (or loss) for the period, which will eventually be closed to Retained Earnings.