A company had revenues of $75,000 and expenses of $62,000 for the accounting period.Dividends of $8,000 were paid in cash during the same period.Which of the following entries could not be a closing entry?

Question

Quizplus · Accepted Answer

This entry cannot be a closing entry because it would result in a zero balance in the Income Summary account, which is not the purpose of a closing entry. The purpose of a closing entry is to transfer the balances of revenue and expense accounts to the Income summary account, and then transfer the balance of the Income summary account to the Retained earnings account. Therefore, the closing entry should involve both the Income Summary and Retained earnings accounts. Choices A, C, D and E all involve one or both of these accounts, making them potential closing entries.

A Company Had Revenues of $75,000 and Expenses of $62,000