The entry to close the expense account(s) was entered in reverse-Income Summary was credited and the expense account(s) was/were debited. This error would cause:
A) assets to be overstated.
B) liabilities to be overstated.
C) the Capital account to be understated.
D) the Capital account to be overstated.

Question

Quizplus · Accepted Answer

Closing entries are meant to transfer the balances from temporary accounts (like expenses) to permanent accounts (like the Capital account). If expenses are debited instead of being credited, it would decrease the expenses more than it should, leading to an overstatement of the net income and, consequently, the Capital account.

The Entry to Close the Expense Account(s) Was Entered in Reverse-Income