Question

What is the general journal entry needed to close expense(s) for the year-end?

a) Debit Service Revenue, Credit Income Summary
b) Debit Income Summary, Credit Service Revenue
c) Debit Income Summary, Credit Expenses
d) Debit Expenses, Credit Income Summary

Answer 1

The correct general journal entry to close expenses for year-end is to debit Income Summary and credit Expenses, which transfers the expense balances to the Income Summary account.

Step-by-step explanation:

What is the general journal entry needed to close expenses for the year-end? At the end of an accounting period, all the expense accounts that have been used to record transactions during the period need to be closed to a summary account. The correct general journal entry needed to close expenses is to debit Income Summary and credit Expenses. This moves the balances from the individual expense accounts into the Income Summary account, which is eventually used to determine the net income or loss for the period.

The process of closing entries involves four main steps:

• Close all income accounts to Income Summary.
• Close all expense accounts to Income Summary.
• Close Income Summary to Retained Earnings.
• Close Dividends (or Draws) to Retained Earnings.

Therefore, the correct answer is c) Debit Income Summary, Credit Expenses.