Question

A company had revenues of $54,000 and expenses of $43,250 for the accounting period. The company paid $5,950 cash in dividends to the owner (sole shareholder). Which of the following entries could not be a closing entry?

A. Debit Income Summary $10,750; credit Retained Earnings $10,750.
B. Debit Income Summary $54,000; credit Revenues $54,000.
C. Debit Revenues $54,000; credit Income Summary $54,000.
D. Debit Income Summary $43,250, credit Expenses $43,250.
E. Debit Retained Earnings $5,950, credit Dividends $5,950.

Answer 1

Answer:B. Debit Income Summary $54,000; credit Revenues $54,000.

Step-by-step explanation:

The following entries can be a closing entry

a)To record closing entry of revenue account

Account Debit Credit

Revenues $54,000

Income summary $54,000

b)To record closing entry of expense account

Income summary $43,250

Expenses $43,250

c)To record closing entry of income summary account

Income summary ( $54,000- $43,250) $10,750

Retained earnings $10,750

d) to record the closing entry of dividends account

Retained Earnings $5,950

Dividend $5,950

The entry that could not be a closing entry is B. Debit Income Summary $54,000; credit Revenues $54,000 because income summary account should be credited with the revenue amount of $54,000 as Revenue increases the income of every business.