Short Company has the following income statement for 2012:

-Refer to Exhibit 4-2. Given the information above, the entry to close revenues and expenses would include a

Question

Short Company has the following income statement for 2012:
 
-Refer to Exhibit 4-2. Given the information above, the entry to close revenues and expenses would include a

Quizplus · Accepted Answer

To close revenues and expenses, we need to debit each revenue account and credit each expense account for their respective amounts. This will result in a net income or loss for the period, which is then transferred to the Retained Earnings account. In this case, the total of revenues ($651,000) is larger than the total of expenses ($640,500), resulting in a net income of $10,500. Therefore, we would close each revenue account with a debit of $651,000 and each expense account with a credit of $640,500. The remaining balance of $10,500 (credit) would be transferred to the Retained Earnings account, resulting in a debit of $10,500 to Retained Earnings.

Short Company Has the Following Income Statement for 2012