The entry to close net income at the end of the accounting period involves a
A)debit to Retained Earnings and a credit to Income Summary.
B)debit to Income Summary and a credit to Retained Earnings.
C)debit to Accounts Receivable and a credit to Retained Earnings.
D)debit to Retained Earnings and a credit to Accounts Receivable.
E)debit to Income Summary and a credit to Accounts Receivable.

Question

Quizplus · Accepted Answer

The entry to close net income at the end of the accounting period involves debiting Income Summary (to transfer the net income) and crediting Retained Earnings (to increase the balance of the permanent equity account). Therefore, the correct option is B, which shows a debit to Income Summary and a credit to Retained Earnings. None of the other options correctly represent the closing entry for net income.

The Entry to Close Net Income at the End of the Accounting