Which of the following journal entries is required to close the Income Summary account of a company with a net loss?

Question

Quizplus · Accepted Answer

For a company with a net loss, the Income Summary account would have a debit balance. To close the account, a credit entry is needed. Since the net loss reduces the company's Retained Earnings, the credit should be made to the Retained Earnings account, thereby reducing the balance. The correct journal entry to close the Income Summary account for a company with net loss is therefore: Credit Income Summary, Debit Retained Earnings. Choice A, B, and D are incorrect as they do not reflect the proper treatment of a net loss.

Which of the Following Journal Entries Is Required to Close