Question

A company had revenues of $75,000 and expenses of $62,000 for the accounting period. The owner withdrew $8,000 in cash during the same period. Which of the following entries could not be a closing entry?

A. Debit Income Summary $62,000, credit Expenses $62,000.

B. Debit Income Summary $13,000; credit Owner's, Capital $13,000.

C. Debit Owner's, Capital $8,000, credit Owner's, Withdrawals $8,000.

D. Debit Revenues $75,000; credit Income Summary $75,000.

E. Debit Income Summary $75,000; credit Revenues $75,000.

Answer 1

E. Debit Income Summary $75,000; credit Revenues $75,000.

Step-by-step explanation:

The closing entries are as follows:

1. Service Revenue A/c Dr A/c XXXXX

To Income Summary A/c XXXXX

(Being revenue account closed)

2. Income summary A/c Dr XXXXX

To Expenses A/c XXXXX

(Being the expenses account is closed)

3. Income summary A/c Dr XXXXX

To Retained earning A/c XXXXX

(Being the profit is recorded)

4. Retained earnings A/c Dr XXXXX

To Dividend A/c XXXXX

(Being dividend account is closed)

And all other closing entries are also passed

So, the option E is right as it reflect the wrong journal entry