Magic Corporation has the following normal account balances in its general ledger at the end of a period:
Sales revenue $ 1,060,000
Advertising expense 180,000
Which of the following gives the correct entry required to close only the accounts above?
D) None of the above. These accounts are not closed.

Question

Quizplus · Accepted Answer

The closing process requires that revenue accounts are debited and retained earnings are credited for the amount equal to the revenue balance. The closing process also requires that expense accounts are credited and retained earnings debited for an amount equal to the expense balance. The net amount of retained earnings credited in this problem is equal to $880,000 (or $1,060,000 - $180,000), since revenues are greater than expenses.

Magic Corporation Has the Following Normal Account Balances in Its