When a firm has net income,which of the following is not an appropriate closing entry?
A)Debit Sales,credit Income Summary
B)Debit Retained Earnings,credit Income Summary
C)Debit Income Summary,credit Insurance Expense
D)Debit Income Summary,credit Depreciation Expense

Question

Quizplus · Accepted Answer

Closing entries are made to transfer the balances of temporary accounts (like revenues, expenses, and dividends) to permanent accounts (like Retained Earnings). Option B is not appropriate because it suggests debiting Retained Earnings and crediting Income Summary, which is the reverse of the correct process. Normally, the Income Summary account is debited and Retained Earnings is credited to transfer net income to Retained Earnings.

When a Firm Has Net Income,which of the Following Is