Question

The income statement for Pepe Serna Company for the year ended December 31,2022 is as follows: Prepare the entries to close the revenue and expense accounts at December 31, 2022. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Dec. 31 (To close revenue accounts) Dec. 31 (To close expense accounts)

Answer 1

To close Pepe Serna Company's revenue accounts, debit each revenue account and credit the Income Summary, and vice versa for closing expense accounts. Finally, close the Income Summary account to Retained Earnings account.

Step-by-step explanation:

The question relates to the closing entries in accounting, specifically for the purpose of closing the revenue and expense accounts at year-end, which is a critical step in the accounting cycle. The income statement accounts are closed to prepare the books for the next accounting period. To close the revenue accounts, you would debit each revenue account for the amount of its credit balance and credit the Income Summary account to reduce the balance to zero. Conversely, to close the expense accounts, you would credit each expense account for the amount of its debit balance and debit the Income Summary account.

Depending on Pepe Serna Company's specific accounts, a typical journal entry to close revenue accounts would look something like this:

Date: Dec. 31

Account Titles and Explanation:

Debit - Revenue Account (for the total revenue amount)

Credit - Income Summary (for the total revenue amount)

To close the expense accounts:

Date: Dec. 31

Account Titles and Explanation:

Debit - Income Summary (for the total expense amount)

Credit - Each Expense Account (for the corresponding expense amounts)

Lastly, you would close the Income Summary account to the retained earnings account to reflect the net income or loss for the year.