Income Summary has a credit balance of $17,000 in S. Sufjan Co. after closing revenues and expenses. The entry to close Income Summary is
A) credit Income Summary $17,000, debit Retained Earnings $17,000.
B) credit Income Summary $17,000, debit Dividends $17,000.
C) debit Income Summary $17,000, credit Dividends $17,000.
D) debit Income Summary $17,000, credit Retained Earnings $17,000.

Question

Quizplus · Accepted Answer

Income Summary has a credit balance of $17,000, which means that there were more revenues than expenses in the period. To close Income Summary, we need to transfer this balance to Retained Earnings. Since Income Summary has a credit balance, we need to debit it to reduce it to zero. The corresponding credit would be made to Retained Earnings. Therefore, the entry to close Income Summary is to debit Income Summary $17,000 and credit Retained Earnings $17,000. Choice D is the only option that matches this entry.

Income Summary Has a Credit Balance of $17,000 in S