Question

After preparing and posting the closing entries for revenues and expenses, the income summary account has a debit balance of $36,000. The entry to close the income summary account will be: Multiple Choice Credit Retained earnings $36,000; debit Dividends $36,000. Debit Income Summary $36,000; credit Dividends $36,000. Debit Retained earnings $36,000; credit Income Summary $36,000. Debit Dividends $36,000; credit Income Summary $36,000. Debit Income Summary $36,000; credit Retained earnings $36,000.

Answer 1

Debit Retained earnings $36,000; credit Income Summary $36,000

Step-by-step explanation:

The income statement has its last line as the net income/loss for the period. The income summary account is closed into the retained earnings.

The expense in the income statement is closed by crediting the account and debiting the income summary. For revenue, the account is debited and the income summary is credited.

Hence where the income summary account has a debit balance of $36,000, the entries to close it will be Debit Retained earnings $36,000; credit Income Summary $36,000