The income statement for the month of June, 2021 of Camera Obscura Enterprises contains the following information: The entry to close Income Summary to Retained Earnings includes

Question

The income statement for the month of June, 2021 of Camera Obscura Enterprises contains the following information:  The entry to close Income Summary to Retained Earnings includes

Quizplus · Accepted Answer

The entry to close Income Summary to Retained Earnings is a transfer of net income (or loss) to the Retained Earnings account. Since the income statement shows total revenues of $7,000 and total expenses of $5,700, the net income for the month of June is $1,300 (i.e. $7,000 - $5,700 = $1,300). Therefore, the entry should include a credit to Retained Earnings for the same amount ($1,300). Choice A is incorrect because revenues are closed to Income Summary, not the other way around. Choice B is incorrect because expenses are debited to Income Summary, not credited, and the total amount should be $5,700, not $7,000. Choice C is incorrect because it suggests crediting Income Summary, which is closed to Retained Earnings, not the other way around.

The Income Statement for the Month of June, 2021 of Camera